Following the FCA’s statement on robo-advice, which required many providers to make ‘significant changes’, Robbie Constance, Head of Financial Services Regulatory, DWF, commented: “It is no surprise that robo-advisers and ‘online discretionary investment managers’ are having teething troubles, especially when we take into account the complex regulatory regime these services operate under. Rather than allow for cheap and simple alternative services, MiFID II expressly requires that direct to consumer digital investment businesses achieve the same high standards as face-to-face advisers.
“Robo-advisers that are already in operation have some urgent work to do to ensure that they are compliant with the current guidelines. Those still in ‘build mode’ – particularly banks – will no doubt take stock of the FCA’s statement, and add it to their long list of regulatory and other risks to worry about.
“If they haven’t already done so, firms should critically assess the FCA’s article, carry out an urgent ‘gap analysis’ against their own proposition and reconsider their product governance in light of this – and the MiFID II rules. It’s the perfect time for an independent third party to work with digital investment businesses to develop best practice.
“Unusually – but understandable given the FCA’s enthusiasm for fintech and need to encourage solutions to fill the ‘advice gap’ – there is no dire warning of enforcement action or remedial timeline imposed. Firms will welcome the softly sofly approach of feedback and a reminder of the need to get things right. In less favoured sectors of financial services, the FCA’s findings would probably have resulted in ‘Dear CEO’ letters, skilled persons’ reviews, variations of permissions, remediation – and worse. For now the FCA has shown willing to wait and see.”