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Editor’s note: The gulf between advice and robo is becoming clear

“The scope for a major misselling scandal is very real.” That is how a lawyer friend of mine described the results of the FCA’s review into robo-advice last week. I’m finding it hard to disagree with that verdict as it stands.

It’s difficult to know where to start, as the list of deficiencies is pretty wide ranging. Suitability assessments failed to properly evaluate objectives and capacity for loss. Most firms couldn’t provide enough up-to-date information to adequately maintain an ongoing client relationship, there were flaws in spotting vulnerable customers, and oversight of firm-level risks was weak.

My key takeaway, however, was that “there appeared to be confusion within some firms as to the nature of the auto advice service being provided”. Essentially, “robo-advisers” were caught out for not making it clear whether their service was actually advised, or non-advised, discretionary or non-discretionary.

Whether someone is giving advice, guidance or anything in between has real implications for issues such as consumer protection, so should not be passed over glibly. It’s not as if robo-advisers were not warned, either. A linchpin of the Financial Advice Market Review in 2016 was to clarify the precise boundary between information and fully regulated advice, a mission accomplished by adopting the Mifid II standard that advice must contain a personalised recommendation.

Robo-rumble: Will FCA scrutiny stop digital services moving further towards advice?

Being called out for communications that look like advice, smell like advice but don’t actually provide it should scare the robos into action. It never was good enough to sit on the fence, pretending that the nudges and hints you gave were worthy of the term “advice”, but not actually giving it from a regulatory perspective so as not to take on the additional liability.

Banks have been quite smart when it comes to this exact problem. After culling adviser numbers post-RDR they were quick to adopt DIY savings and investment services for retail clients. Then they started making noise about developing bolt-ons or hybrid models that would provide actual advice. Many of these have stalled or been ditched altogether, presumably for fear of regulatory reprisal should the FCA (rightly) decide that advice was given. I would hazard a guess that many independent robo-advisers will soon follow suit.

It is interesting to note that the FCA says the seven automated online discretionary investment management firms it reviewed made up over half of the firms in that market at the time. With new entrants moving in since, this will have only exacerbated the FCA’s concerns.

If robo-advisers want to keep calling themselves that, then fine. But they must bear the consequences of the advice label.



FCA robo review a wake-up call for the industry

An FCA review of automated investment advice has given a wake-up call to robo-advisers to meet the same standards as traditional advisers. Finance & Technology Research Centre director Ian McKenna says the regulator has worked hard with the industry to raise standards and he now hopes it can do the same with robo-advisers. He says: […]

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Robos under fire over suitability and disclosure failings

Robo firms’ shortcomings around suitability, fee disclosure and identifying vulnerable clients have been highlighted in findings from an FCA review today. The regulator reviewed seven firms offering online discretionary investment management services and three firms giving automated advice. The FCA says service and fee-related disclosures at most online discretionary investment management firms in its sample […]


Barclays rolls back on robo-advice plans

Barclays has rolled back on plans to launch a robo-advice service, Money Marketing understands. The bank launched a new self-directed investment platform, Smart Investor, in August last year. Sources tell Money Marketing that the bank was also planning to complement this with a hybrid advice offering that would combine online services with a face-to-face element, […]

Jason Butler: The real reasons people take professional advice

Since I ceased operation as a practising financial planner almost three years ago, I have spent a lot of time researching the type of help and advice people need with their finances. While online tools can help, there are many situations when a person needs an individual and tailored approach from a human adviser. But […]

FAMR – a familiar response

Pension specialist Fiona Tait takes a look at the Financial Advice Market Review and assesses the three areas where it suggests improvements can be made With significant budget changes ruled out (for a while anyway), the pension community briefly turned its attention to the FCA’s final report on its Financial Advice Market Review (FAMR), hoping […]


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There is one comment at the moment, we would love to hear your opinion too.

  1. Disclosure is key and it seems that this is something that consumers are not clear on.

    Is it advice or not, if it is, what type of advice is it, if it’s restricted, what are the restrictions, are the products covered by FSCS, how is the adviser being paid, is there commission… etc etc.

    There are calls (Paul Lewis) for the term financial advice not to specifically refer to Regulated Advice.

    I fear that if this occurs, there will be a raft of financial advisers who are not Financial Advisers.

    Providing the client is fully and clearly aware of the service / products they are accessing there are no issues, evidence however would suggest they aren’t.

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