via online submission form re: joint discussion … · via online submission form re: joint...

4 March 2016 Submission to the Joint Committee of the European Supervisory Authorities VIA ONLINE SUBMISSION FORM RE: JOINT DISCUSSION PAPER ON AUTOMATION IN FINANCIAL ADVICE Dear Joint Committee: Financial Planning Standards Board Ltd.s (FPSB1) European member organizations (collectively, FPSB Europe) are pleased to provide comments on ESAs Joint Committee Discussion Paper on Automation in Financial Advice. FPSB Europe consists of eight nonprofit professional financial planning bodies, including:

1) sterreichischer Verband Financial Planners (Austria) 2) Association Francaise des Conseils en Gestion de Patrimoine

Certifies (France) 3) Financial Planning Standards Board Deutschland (Germany) 4) Financial Planning Standards Board Ireland 5) Financial Planning Standards Board Nederland (The Netherlands) 6) Swiss Financial Planners Organization (Switzerland) 7) Finansal Planlama Dernei (Turkey) 8) Chartered Institute of Securities and Investments/Institute of

Financial Planning (United Kingdom) Established in 2004, FPSBs mission is to benefit the public by establishing, upholding and promoting worldwide professional standards in financial planning. Working through our member organizations, represented in Europe by the organizations above, FPSB and its member organizations develop, promote and enforce internationally consistent, locally relevant standards so that:

The public can identify qualified, competent and ethical financial planners;

Practitioners can distinguish themselves as qualified, competent and ethical financial planning professionals; and

Consumers, regulators and other key stakeholders can have confidence in the financial planning profession and in financial planning professionals, and recognize the benefits financial planning offers to individuals and society.

1 FPSB manages, develops and operates certification, education and related programs for financial planning organizations to benefit the global community by establishing, upholding and promoting worldwide professional standards in financial planning. FPSB demonstrates its commitment to excellence with the marks of professional distinction CFP, CERTIFIED FINANCIAL PLANNER and CFP Logo Mark. FPSB has a nonprofit member organization in the following 26 territories: Australia, Austria, Brazil, Canada, Chinese Taipei, Colombia, France, Germany, Hong Kong, India, Indonesia, Ireland, Israel, Japan, Malaysia, New Zealand, the Netherlands, the Peoples Republic of China, the Republic of Korea, Singapore, South Africa, Switzerland, Thailand, Turkey, the United Kingdom and the United States. For more, visit fpsb.org.

FPSBs Europes Response to ESMAs Consultation Paper on MiFID II/MiFIR

2

FPSB owns the international CERTIFIED FINANCIAL PLANNER certification program outside the United States, and has licensed the member bodies of FPSB Europe to oversee the administration, promotion and enforcement of CERTIFIED FINANCIAL PLANNER certification in Europe. CERTIFIED FINANCIAL PLANNER professionals meet rigorous competency, ethics and practice standards, qualifying them to develop financial planning strategies that assist clients in achieving their financial and life goals. CERTIFIED FINANCIAL PLANNER professionals are part of a growing global community of financial services practitioners who place clients interests first as part of their commitment to financial planning professionalism, and who embrace FPSBs Code of Ethics and Professional Responsibility and Financial Planning Practice Standards. As of 31 December 2013, there were 153,376 CFP professionals in 25 countries and territories worldwide, with close to 5,000 CERTIFIED FINANCIAL PLANNER professionals practicing in Austria, France, Germany, Ireland, the Netherlands, Switzerland and the United Kingdom. About FPSBs Standards FPSBs standards are based on a global framework that includes empirical research of the abilities, professional skills and knowledge needed to practice financial planning. FPSB and its member organizations have developed initial education, assessment, experience and ethics requirements, as well as continuing professional development standards for financial planning professionals globally. FPSB Europes member bodies have localized these global standards and certification requirements for applicability in each of their territories, and maintain the relevancy of these standards through regular analyses of the practice of financial planning in Europe. What is Financial Planning? FPSB and its member organizations define financial planning as the process of developing strategies to assist clients in managing their financial affairs to meet life goals. The process of financial planning involves reviewing all relevant aspects of a clients situation across a large breadth of financial planning activities, including interrelationships among often conflicting objectives. At the end of the financial planning process, a financial planner may or may not recommend products to a client. Although financial planning is gaining prominence as a professional practice globally, people who call themselves financial planners often do so with little or no training or oversight. FPSB seeks to position financial planning oversight and models of professionalism within, or adjacent to, existing or proposed regulatory frameworks, whereby regulators and professional financial planning bodies work together to protect and benefit consumers.

FPSBs Europes Response to ESMAs Consultation Paper on MiFID II/MiFIR

3

FPSB Europes Point of View FPSB Europes responses to ESMAs questions are through the rubric of financial planning a client-centric, process-driven professional practice that can help (re)build trust and restore the publics confidence in the marketplace and financial intermediaries. If you have any questions on our submission, or would like additional information, please feel free to contact me at +353 (87) 6997543 or [email protected] or FPSBs CEO Noel Maye at +1-720-407-1902 or [email protected]. We appreciate the opportunity to participate in ESMAs comment process.

Respectfully submitted,

Paul Grimes, CFP Chairperson, FPSB European Forum CEO, FPSB Ireland cc: Otto Lucius, Director, sterreichischer Verband Financial Planners

Guy Bonduelle, CEO, Association Francaise des Conseils en Gestion de Patrimoine Certifies Guido Kuesters, Director, Financial Planning Standards Board Deutschland Angelo van Nies, CEO, Financial Planning Standards Board Nederland Markus Streule, Director, Swiss Financial Planners Organization Steve Gazzard, CEO, Institute of Financial Planning Noel Maye, CEO, Financial Planning Standards Board Ltd.

4/27/2016 Discussion Paper on automation in financial advice - European Banking Authority

https://www.eba.europa.eu/regulation-and-policy/consumer-protection-and-financial-innovation/discussion-paper-on-automation-in-financial-advice?p_p_auth=JRNo6 1/6

EnglishDocumentlibrary SingleRulebookQ&A Contacts CEBSarchive Extranet

SearchtheEBAwebsite Search

Advancedsearch

EBA Regulationandpolicy Topics Consumerprotectionandfinancialinnovation DiscussionPaperonautomationinfinancialadviceJointComitteeeDiscussionPaperonautomationinfinancialadvice FinancialPlanningStandardsBoard/FPSBEurope

Aboutus Regulationandpolicy Supervisoryconvergence Riskanalysisanddata Consumercorner News&press

BackFinancialPlanningStandardsBoard/FPSBEurope

Asanetworkofnonprofitstandardssetting,professionalfinancialplanningandCERTIFIEDFINANCIALPLANNERcertificationbodies,thememberorganizationsofFPSB

Europeagree,forthemostpart,withtheESAsassessmentofthethreemaincharacteristicsofautomatedfinancialadvicetools,butwouldaddsomerefinementstowhathas

beenpresented.

1.1Without/LimitedHumanInterventionOutput:Theprimarymarketlikelytoinitiallyaccessautomatedadvicetoolswillbeindividualswithsimpleneeds,thosecomfortable

handingdecisionmakingovertoautomatedservices,andthosenotservedbyaninpersonadviser(s)thenonadvisedcommunity.However,forthoseseekingholistic

financialplanningorservicesdealingwithmorecomplexinheritance,retirementortaxmatters,thecurrentalgorithmdrivenelementsoftheautomatedtoolsareunlikelyto

replacethevalueof,orneedfor,aninpersonfinancialadviserorfinancialplanner.Asautomatedtoolsevolveintonextgenerationplatforms,andasthenonadvised

communitytransitionstodealingwithwealthierclientsandmorecomplexadviceneeds,alikelyfutureautomatedadvicemodelwillnotcallforrelianceoneitherroboadviceor

inpersonadvicebutratheronahybridmodelthatcanembraceortransitionautomatedadviceuserstoacombinationofautomatedandinpersonadviceservices.

1.2Without/LimitedHumanInterventionInput:TheESAPaperfocusesonthelackofhumanattributessuchasemotionalresponse,bias,judgment,etc.asapositive

elementoftheautomatedtools.Butregulatoryauthoritiesandothersneedtobeclearthat,inthefaceofchangingclientcircumstancesormarketconditions,thelackof

humanattributesisfixedonlyaftertheautomatedtoolhasbeenprogrammed.Theunderlyingassumptionsofthetoolsalgorithm(s)areverymuchdependentonthehuman(or

corporate)biasesandjudgmentsofitsprogrammersandthereforebiasesandjudgmentsarebakedintothetoolfromthestartandfixed,untilreprogrammedtoaddressa

newmarketsituation.Moreover,whileremovinghumanattributescanaddtomoreconsistent,lessemotionorbiasdrivenrecommendations,ithasthedownsideoflosingthe

adaptivenatureofaninpersonfinancialadviserorprofessionalfinancialplannerrelationshipinthefaceofchangingclientsituations,needsorwants.

1.3TheOutputIs,orIsPerceivedtoBe,Advice:Whethertheautomatedtoolsprovideadviceorinformation/guidanceislikelytobeoneofthebiggerchallengesintermsof

therolloutofthesetoolsandservicesthroughoutEurope.WhileMiFIDistacklingtheissueofwhatconstitutesretailinvestmentadvice,thecircumstancesinwhichautomated

advicetoolscanbeclassedasinformationorguidancetoolsandwhentheycanbeconsideredtobeprovidingregulatedadviceremainsagrayarea.Whetherconsumers

canjustifiablyconsidertheoutputoftheautomatedtoolstobeadvicealsobringsintofocushowfirmswilldealwiththeexpectationsandobligationsaroundprovidingadvice

tocustomerswhodonotprovidesufficientinformationforautomatedtoolstoprovideappropriateandcompliantoutputstoclients.Europesregulatoryregimeforautomated

financialadvicewillhavetoaddresshowfirmscanadequatelymanageinternalcontrolstosuperviseroboadvisers,andaddresstherisktobothfirmsandclientswhenclients

failtoproviderobo=adviserswithsufficientinformationtoproduceanappropriateoutputorlevelofadvice.HolgerSpielberg,headofDigitalInnovationatCreditSuisse,framed

thecorrectfocusfordevelopingautomatedinvestmentserviceswhenhesaid,"Attheendoftheday,weneedtolook[at]theusertherecipientoffinancialservices.We

needtoputthemattheforefront."

Theoutputfromautomatedtoolstendstobemorefocusedononefinancialsector,beitbanking,insuranceorinvestingassuch,theoutputfromthetoolismoreaptly

describedasinvestmentadviceorinsuranceadviceratherthanfinancialadvice.Infact,thevastmajorityofadvicebeingprovidedbyroboadvisersismorespecifically

investmentadviceaspartofaclientswealthmanagementstrategy.Regulatorsmightconsiderrequiringautomatedadviceproviders,throughappropriatenamingand

descriptions,todisclosethelimitationsofthescopeoftheoutputbeingdeliveredandtocalloutthattherecommendationsbeingmadebythetoolsdonotnecessarilytakeinto

accounttheinterrelationshipsacrossabreathoftheclientsfinancialoptionstopresentanoptimalsolution.Iftheconsumerhasanexpectationthattheoutputfromthetoolis

generalfinancialadvice,thenregulatorsshouldholdtheprovidertothesameexpectationsasthoserequiredofaninpersonadviser.


Europedonotofferautomatedfinancialadvice,norhaveweconductedresearchintoautomatedtoolsandofferingsineachfinancialsectorinourcountries.Someofthe

automatedtoolsweareawareofinclude:

InTurkey,FPSBsmemberorganizationisawarethatsomeonlinebankingservicesincludeadvicearoundalternativepersonalloansorextensionofcreditcarddebt.In

addition,someTurkishbanksprovideanautoinvestmentoptionforcashsurplusesinapersonalorcorporateaccount.Inthiscase,theaccountownerwoulddefinethecriteria

1.DoyouagreewiththeassessmentofthecharacteristicsofautomatedfinancialadvicetoolspresentedinthisDiscussionPaper?Ifnot,pleaseexplainwhy.

2.Arethereanyotherrelevantcharacteristicsofautomatedfinancialadvicetools?

3.Areyouawareofexamplesofautomatedfinancialadvicetoolsbeingusedinthebanking,insurance,and/orsecuritiessectors?Pleaseprovideexamples,givingdetailsoftheiroperatingprocess.



bywhichthesecashsurplusescouldbeinvested.

InIreland,FPSBsmemberorganizationhasobservedthatlocalandinternationalinstitutionsareincreasinglyusingautomatedadvicetoolstoadviseclientsonportfolio

suitability,withanaggregationfacilityincluded.Thistypeofadvicefallsunderthecategoryofportfoliorebalancing,andtheadvicetendstoencouragereplacingoutofhouse

investmentswithinhouseproducts,andmaynotfullyconsiderhowtheclientsoverallfinancialsituationmightbeaffectedbyfees,taxlosses,orriskwhenconsolidating

investmentswithonebank.

InFrance,FPSBsmemberorganizationnotesthat,inthelifeinsurancesector,AdvizepermitsautomatedallocationsofunitlinkproductsbasedonMorningstarratings.And

Yomoni,aFrenchonlinediscretionaryinvestmentstartuprolledout,itsfirstproductslastyearwhichprovidedautomatedinterfacesforriskprofiling,afterobtainingauthorization

fromFrancesfinancialregulator.

Spanishbank,BBVA,announcedapartnershipwithFutureAdvisorinJanuary2016,wherethebankwillsoonintroduceitsownautomatedinvestmentadvicesoftwareand

clientscanstartinvestmentmanagementbasedonadviceprovidedbyarobot,withfeaturesthatwillincludemarketmovementbasedautorebalancingortaxlossharvesting.

N/A.Asanetworkofnonprofitstandardssetting,professionalfinancialplanningandCERTIFIEDFINANCIALPLANNERcertificationbodies,thememberorganizationsofFPSB

Europedonotofferautomatedfinancialadvice.

WhilethisquestiondoesnotapplydirectlytoFPSBEurope(whichiscomprisedofnonprofitstandardssetting,professionalfinancialplanningandcertificationbodies),FPSBs

memberorganizationsobservethat,insomecountriesinEurope(e.g.,Turkey),automatedadvice(forbanking,insuranceorsecurities)isnotdefinedintheregulatory

framework,whichcouldbeabarriertoorganizationswishingtoofferautomatedadvicetoolsbecausetheywouldneedtoseekregulatoryapprovaltooperate.FPSBsmember

organizationinGermanynotesthatconformitytoregulationcouldalsoimpactthedevelopmentorofferofautomatedadvicetoolsinthatterritorygiventhatseveralmodels

wouldnotworkiftheclientisnotanexecutiononlyclient,becauseofthecomplexityinvolved.Additionally,FPSBEuropememberorganizationscommentedthatthebiggest

barrierforfirmsoffering/developinganautomatedadvicetoolwastheconcernabouthowtheserviceswouldberegulated,andwhetherfirmscouldfaceretroactiveregulatory

actionforservicesofferedasguidance/informationthatwaslaterdeemedtobeadvicebytheauthorities.Giventhenewnessoftheconceptandplatforms,firmsinEuropeare

likelygoingtopushformoreintelligent(ratherthanjustmore)regulationintheroboadvicespace,andrequestflexibleenoughregulationthatwillallowanascentindustryto

establishitselfandevolve

Automatedadvicetoolswillenablefinancialplannersandfinancialadviserstoincreasepracticeefficienciesorcosteffectivenessserveclientswhoareyounger,lowerincome

orwithfewerinvestableassetsandfreefinancialadvisersandfinancialplannerstodevotemoretimetoactivitiesthatbringaddedvaluetoclients.Automatedadvicetools

couldbeusefulforclientswithlesscomplicatedfinancialneeds,butsuchtools(onastandalonebasis)wouldnotbeappropriateforhighnetworthclientswithcomplex

financialneedsandsituations.Automatedadvicetoolsshouldbeseenasacomplementto,butnotareplacementfor,workingwithacompetent,ethicalfinancialplanneror

financialadviserwhoactsintheclientsbestinterests.

FPSBEuropeagrees,forthemostpart,withtheESAsdescriptionofthepotentialbenefitstoconsumers,butwouldaddthatthebenefitsofautomatedadvicetoolsalsobring

additionalshortcomingsorrisks.

(B1)FPSBEuropeagreesthatautomationwillprovideconsumerswithalowercostoptiontohumanadvice.However,payingthelowestpricemaynotalwaysbethesoundest

criterionforobtainingthebestadvicetoguidedecisionmakingforfinancialandlifegoalsandasoundretirement.Thenotionofsometimes,yougetwhatyoupayforwillneed

tobeclearlyunderstoodbycustomers.

(B3)Whiletheabilityofautomatedtoolstomorereadilyfacilitatecrossbordertransactionsbringsbenefitstoconsumers,italsobringsaddedrisks,particularlyforretailand

unsophisticatedinvestors.

(B4)Whileautomationwillenableconsumerstoaccessfinancialadviceinafaster,easierandnontimeconsumingway,speedisntalwaysapluswhenitcomestoconsumers

engaginginfinancialdecisionmaking.Somefinancialdecisionsthatconsumersneedtomakeshouldbemadeforthemidandlongterm.Furthermore,readyaccessto

automatedadviceandportfoliorebalancingtoolscouldleadsomeconsumerstojumpinandoutoffinancialinstrumentsandthemarketswhentheyshouldbestickingtotheir

midandlongtermfinancialstrategies.GlobalresearchconductedbyFPSBamong19,000consumersin19countries,withseveralthousandfromEurope,showedthatpeople

feltmoreconfidentandwerebetteratstickingtotheirfinancialstrategieswhentheyhadafinancialplanandworkedwithaprofessionalfinancialadviserorfinancialplannerto

guidetheirfinancialdecisionmaking.

(B5)FPSBEuropeagreesthatawelldevelopedalgorithmcouldensureequalandsimilaradvicetoallconsumerswithsimilarcharacteristics.However,consumerswithsimilar

characteristicsshouldntnecessarilyreceiveequalorsimilaradvice.Itsthenuancesanddifferencesofhumannaturethatneedtobemeaningfullyaddressedbytheadvicetool

orthefinancialadviserorfinancialplanneriftruevalueistobedelivered.Whiletheroboadvicetoolmightaskathirtysomethingcoupletheirchildsage,willitaskifthechildis

aspecialneedschildwithsubstantiallongtermcareneeds?Willtheroboadvicetoolaskifthepersonhaddualnationalities,oneofwhichisU.S.,whichcomeswithsubstantial

4.Doyouoffer/areyouconsideringofferingautomatedfinancialadvicetoolsaspartofyourbusinessmodel?Ifso,pleasebrieflydescribe:i)whattypeofentityyouare,e.g.,longestablished,startup,aproductprovider,anintermediaryii)theserviceyouprovide(e.g.towhatextentdoyouintegratehumaninteractioninthetoolyouprovide?)iii)thenatureofyourclientsiv)yourbusinessmodelv)whodevelopedtheautomatedtool(i.e.anexternalcompanyordevelopedinternally?)andvi)thesizeofyouractivityand/orforecastactivity?

5.Doyouconsidertherearebarrierspreventingyoufromoffering/developingautomatedfinancialadvicetoolsinthebanking,insuranceandsecuritiessectors?Ifso,whichbarriers?

6.Doyouconsiderthepotentialbenefitstoconsumerstobeaccuratelydescribed?Ifnot,pleaseexplainwhy.



taxobligations?Willtheroboadvicetoolaskifthecustomeriswillingtoearnlessinthemarketsoshecanwriteabook?Andthelistgoesonbydefault,theroboinvestment

advicetoolswillprofileusersintobroadcategories,andwhatfinancialadviceandfinancialplanningneedstobeabletodoistoassesseachpersonsuniquegoalsand

objectivestoensuretheyachievetheirfinancialandlifegoals.

Dependingontherichnessofthetool,regulatoryrequirements,and/orthecommitmentofthefinancialinstitutiontofinancialeducation,FPSBEuropeseesthepotentialto

educateconsumersaboutbasicfinancialconceptsthroughonlineadvicetools.Becauseconsumersprefertoolsthatareunderstandableandeasytouse,firmsthatincorporate

videos,infographics,definitionsorotherexplanationsintotheirautomatedadvicetoolscouldsuccessfullywinbusinessfromconsumerswhodesiretolearnmoreabouttheir

finances.InresearchconductedbyFPSBin2015,Europeanconsumersfrequentlycitedsimplifyingandexplainingfinancialmattersasareasontoworkwithafinancial

professional.Anautomatedadvicetoolthatalsosimplifiesandexplainsfinancialmatterstoclientscouldprovidetheaddedbenefitoffinancialeducationandultimately,

increasethefinancialcapabilityofEuropesconsumers.

FPSBsmemberorganizationinTurkeysuggeststhat,giventhattheproductsandservicesofferedinbankingandinsurancetendtobemorestraightforward(onedimensional)

andaimedatspecificneeds(e.g.,ahomemortgage,alifeinsurancepolicy,etc.),thepotentialbenefitsforconsumerscouldbegreaterfromautomatedservicesinbankingand

insurance.Inthesecuritiessector,thelevelofcomplexityofproductsanddecisionsincreases,asdoesexposuretoriskandlossofcapitaltherefore,thebenefitsarisingfor

automatedadviceusersinthesecuritiessectorcomewithaddedrisks.

FPSBEuropesmemberorganizationshaveobservedtheeaseofuseandcostefficienciesofautomatedadvicetoolsgenerally,butasanetworkofnonprofitstandardssetting,

professionalfinancialplanningandCERTIFIEDFINANCIALPLANNERcertificationbodies,donothavespecificexamplestoprovide.

FPSBEuropeagrees,forthemostpart,withtheESAsdescriptionofthepotentialbenefitstofinancialinstitutions,butwouldaddthatthebenefitsofautomatedadvicetools

alsobringadditionalshortcomingsorrisks.

(B8)Yes,financialinstitutionswillincurlowerscoststoprovideadvicetobroadsegmentsofthemarket.However,firmswillincurincreasedcostsassociatedwiththeongoing

maintenanceofalargerclientbase,andmovingacertainpercentageofthoseclientsintoinpersonadvisedsituationsoncecertainwealthlevelsorassetsundermanagement

arereached.

(B10)Yes,whileautomationcanprovideforamoreconsistentconsumerexperience,theautomationwillneedtoeventuallyallowforvariabilityincustomergoals,needsand

objectives,despiteonthesurfaceappearingtofitageneralconsumerprofile.Thisbecomesincreasingimportanttofirmsfromacomplianceandregulatorypointofviewwhen

customersconsidertheservicebeingdeliveredtobeadvice.

(B11)Algorithmlogicandautomatedprocessesareeasiertoauditwhenitcomestoguidanceandproductdistributionrecommendations,butnotnecessarilyeasiertoaudit

wholescalewhendealingwiththeneedsandpeculiaritiesofindividualadviceclientsandtherecommendationsmadetothem.

Generally,useofautomatedadvicetoolsisnotwidespreadgloballyorinEuropebutlikelytogrowwithinthenext1218months.WhenFPSBLtd.surveyedCERTIFIED

FINANCIALPLANNERprofessionalsonhowtheywoulduseautomatedadvicetools,itwasmainly:(1)togatherclientinformationtosupportpersonalizedadvicedelivery(2)

fortransactionalmatters,freeinguptheplannertofocusontheclientrelationshipandonthedeliveryofactualadvice(3)toreducebusinesscosts,improvebackoffice

efficiencies,passsavingsontoclients,orservealesswealthyclientbase(4)asacomplementtopersonalizedadvice(5)tochecktheconsistency/accuracyoftheir

recommendationsand(6)toincorporateexternalspecializedadviceprovidersintothepracticesofferingtoclients.

Expandingonthepapersnoteinitem40,FPSBsmemberorganizationinTurkeyobservedthatfirmsusingautomatedadvicetoolsmaynolongerseetheneedtoopenbranch

offices,becauseofthepotentialtoexpandtheircustomerbaseonline,thusprovidingsubstantialcostsavingstothefirm.

FPSBEuropesGermanmemberorganizationconsidersthatsectorsthatalreadyexperienceahighercostofregulation,suchasthebankingsector,maymovefasterintothe

automatedadvicespace.


Europedonotofferautomatedfinancialadvice,andthereforehavenotobservedthesebenefitsfirsthand.

FPSBEuropeagreesstronglywiththedescriptionofthepotentialrisksassetforthintheDiscussionPaper.Automatedadvicebringsopportunitiesandthreatstothefinancial

7.Areyouawareofanyadditionalbenefitstoconsumers?Ifso,pleasedescribethem.

8.Doyouseeanydifferencesinthepotentialbenefitsarisingforconsumersineachofthebanking,insuranceandsecuritiessectors?

9.Haveyouobservedanyofthesepotentialbenefitstoconsumers?Ifso,pleaseprovideexamplesanddescribethekindofbenefitthathasaccrued.

10.Doyouconsiderthepotentialbenefitstofinancialinstitutionstobeaccuratelydescribed?Ifnot,pleaseexplainwhy.

11.Areyouawareofanyadditionalbenefitstofinancialinstitutions?Ifso,pleasedescribethem.

12.Doyouseeanydifferencesinthepotentialbenefitsarisingforfinancialinstitutionsineachofthebanking,insuranceandsecuritiessectors?

13.Haveyouobservedanyofthesepotentialbenefitstofinancialinstitutions?Ifso,pleaseprovideexamplesanddescribethekindofbenefitthathasaccrued.

14.Doyouagreewiththedescriptionofthepotentialriskstoconsumersidentified?Ifnot,explainwhy.



servicesmarketplace,potentiallyputtingmoreretailinvestorsatriskwhilealsoincreasingaccesstoadviceandproductstolargersegmentsofsociety.Asdescribedbythe

ESAsinthissection,FPSBEuropestronglybelievesthatautomatedadvicetoolscouldbeusefulforclientswithlesscomplicatedfinancialneeds,butsuchtools(onastand

alonebasis)wouldnotbeappropriateforhighnetworthclientswithcomplexfinancialneedsandsituations.Additionally,FPSBEuropebelievesthatautomatedadvicetools

shouldnotbeviewedasareplacementforhumaninteractionwithaclient.Rather,regulatorsshouldrequireissuersofautomatedadvicetoprovidefeebasedsupporttothose

consumerswhoexperiencefinanciallossesafterexecutingadvice,providedsuchconsumerscreatesuitablelogswithissuersandregulatorspriortoavailingoftheadvice.

Ifendusersassumetheyaregettingadvice,regulatorsshouldrequirefirmstoclassifytheoutputofautomatedadvicetoolsasadviceandregulateautomatedadviceinthe

samemannerashumanadvice.Inaddition,regulatorsshouldrequirefirmstoensurethedatainautomatedadvicetoolsisbasedonuptodateclientinformationandrisk

profiling,andmandateaclientcheckin/reviewatleastannuallyontheappropriatenessoftheadvicebasedon(potentiallychanging)underlyingobjectives.

WhileFPSBEuropeagreesthattheDiscussionPaperdoesagoodjobofdescribingtherisks,FPSBEuropesmemberorganizationshavethefollowingadditionalcomments

forconsiderationbytheESAs:

Re:Risksrelatedtoconsumershavinglimitedaccesstoinformation,and/orlimitedabilitytoprocessthatinformation:

Thetypeofproductsofferedthroughautomatedadvicetoolsmayaffecttherisklevelposedtoconsumers.Themorecomplextheproduct,thegreatertheriskthatconsumers

willnotunderstandwhattheyrepurchasing.AsthepaperacknowledgesinPoint51,consumersmayundulydismisswarningsaslegalsmallprint.FPSBEuropebelievesthat

whileaskingconsumerstocheckaboxacknowledgingtheirunderstandingoftheproductanditsassociatedrisksmayprotecttheproductseller,itdoesntnecessarilyprotect

theconsumer.Regulatorsshouldrequireautomatedadviceproviderstoprovideclearlyvisible,easilyunderstoodwarningstoclientsthatintheabsenceofgood/sufficient

information,theoutputmaynotbeappropriate.Additionally,regulatorsshoulddeterminehowfirmsshouldbestprepareusersfortheoutputrecommendationsinceusersare

goingtoapproachroboadvicewithanoutcomeinmind,theresponseswillbechanneledtodeliveringanoutcomethattheclientthinksheorsheneeds.Lastly,regulators

shouldconsiderifcomplexproductsshouldbeprovidedviaautomationtoretailcustomers.

ToPoint54,adviceprovidedbyanautomatedtoolthatonlyconsidersoneormorestatedobjectivenotonlyprovidesapotentialdisservicetotheclientitalsoenablesthe

clienttogamethesystemtoachieveadesiredresult.Forexample,ifaclient(orapersonworkingonbehalfofaclient)wishestopurchaseaspecificproduct,regardlessof

whethertheproductissuitableorreflectstheclientsbestinterests,thepersoncouldmanipulatetheinformationprovidedtoachieveadesiredresult.Ataminimum,regulators

shouldrequireclientsofautomatedadviceproviderstoacknowledgethecorrectnessofthedatasupplied,creatingsomelevelofresponsibilityonthepartoftheclientforthe

automatedadviceprovided.

FPSBEuropebelievesstronglythatthepotentialexistsforconsumerstoreceiveproductrecommendationsoradvicethatfavorsthefirmattheexpenseoftheconsumer.

Examplesofthiscouldbethattheautomatedadvicetoolrecommendsproprietaryproductsonly,thatitgivespreferencetocertainclientprofileswherethefirmsees

opportunitiestoupselltoother/additionalproducts,orthattherecommendationsresultinchurning.Regulatorsshouldrequirefirmstoimplementsafeguardstoprotectclients

frommissellingbyrequiringafiduciarylevelofcareforadviceprovidedbyautomatedadvicetools.Additionally,regulatorsshoulddevelopguidelinesontheprocessestobe

followedbythedeveloperofautomatedadvicetools,andassumefirmswillmanageconflictsofinterestanddisclosurerequirementsinthedeliveryofautomatedadviceasa

complianceandriskmanagementissue,nodifferentthantraditionaladvicedelivery.Lastly,regulatorsshouldrequireautomatedadviceproviderstoberegistered/approved

throughanindustrybody,orbasedonregulatoryguidelines,withclearguidelinesonwhatproductsandservicescanbeprovidedtoconsumersviaautomation,acompetency

profileoftheissuersofautomatedadvice,andastatementdisclosingtheirclientnetworthrequirements.

ToPoint62,FPSBEuropeagreesandwouldadvocateforaconsistentdefinitionofadvice,aswellasregulatoryguidanceonthestepsthatwouldneedtobetakenbyafirm

(eitherthroughhumaninteractionorautomatedtools)toassesstheappropriateinformationneededtoprovideaclientwithrecommendationsbasedontheclientsbest

interests.Regulatorsmaywishtosetbrightlinesonwhentheuseofanautomatedtoolconstitutesadvice,asopposedtoprovidinganexecutiononlyplatform,andprovide

guidanceonthespecificpoliciesandproceduresfirmsshouldhaveinplacewhenusingautomatedtools,suchaswhoshouldbepermittedtousethetools,whattypeof

educationandtraininginvestmentprofessionalsshouldhavebeforeusingthetools,andwhattypesofsupervisionfirmsshouldusetooverseestaffusingthetools.

Automatedadvicetoolsprovidenodeterrenttoemotionalinvesting.Thosewhoworkwithapersonalfinancialplannerorotherfinancialprofessionalcouldreceiveverbal

counselduringanegativemarketeventtohelptheclientputtheeventintoperspectiveandconsideritsconsequencesinthecontextofalongtermstrategy.Withnosuch

counselprovidedbyautomatedadvicetools,consumersmaylosepotentialearningsandincuradditionalfeesbyreactingtonegativemarketnewsandtakingactionontheir

own.Regulatorsmightencouragefirmstoconsiderautomatedadviceasatoolforfinancialadvisersandfinancialplanners,providedalongsideaprocessfocusedonproviding

advicealignedtotheclientsneedsandobjectives.

Regulatorsneedtoeducatethepublicaboutautomatedadviceandincreasethepublicsawarenessoftheimplicationsofusingautomatedtoolsovertakingadvicefroma

financialadviserorprofessionalfinancialplanner.Automatedadvicetoolscouldleadmorepeopletobecomedoityourselfers,atthemercyofanautomatedsystemthatmay

notbeabletodealwithcomplexityorthatmaynotadviseintheclientsinterests.However,youngergenerations,whoarealreadycomfortablewithtechnology,mayusesocial

mediatoprovidepublicfeedbackorcritiquesabouttheirexperiences,whichcouldplacepressureonpurveyorsofautomatedadvicetoolstorespondwithbetterproducts.

No.

15.Doyouconsidertheretobeanyriskstoconsumersmissing?Ifso,pleaseexplain.

16.Doyouseeanydifferencesinthepotentialrisksarisingforconsumersineachofthebanking,insuranceandsecuritiessectors?

17.Haveyouobservedanyoftheseriskscausingdetrimenttoconsumers?Ifso,inwhatway?



Missionsandtasks

Legalframework

Governancestructure

Aboutus

SingleRulebook

ImplementingBaselIIIinEurope

ImplementingFSBKey

Regulationandpolicy

Reviewpanel

Supervisorydisclosure

Supervisorycolleges

Supervisoryconvergence

EUwidestresstesting

EUwidetransparencyexercise

EUCapitalexercise

Riskanalysisanddata

Nationalcompetentauthoritiesforconsumerprotection

Howtocomplain

Consumercorner

Pressnewsletter

Speeches

Calendar

News&press

No.

FPSBEuropeagreeswiththedescriptionofthepotentialrisksidentifiedbytheDiscussionPaper.

ToPoint82,FPSBEuropeseesthepotentialforconsumerconfusioniftheadviceprovidedbyanautomatedtoolisinconsistentwiththeadviceprovidedbyahumanatthe

samecompany.Inaddition,ifthehumanadviseronlyhasaccesstotheclientdatacollectedbytheautomatedtool,heorshemayhaveinsufficientinformationonwhichtobase

arecommendation,potentiallyresultinginadvicethatdoesnotsuittheclientsbestinterests.

Withthecostefficienciesprovidedbyautomatedadvicetools,firmsmaynotseetheneedtoretainhighlyqualifiedhumanadviserswhocanassistclientswhoneedadditional

advice,orexperienceproblemsunderstandinganautomatedadvicetool.Firmsmayinsteadfocusonhavingtechnicalexpertswhocantroubleshootthesoftwareorwhoare

productexperts,ratherthanonhavingcompetent,ethicalfinancialadvisersandfinancialplannerswhocanassessaclientsstatedandunstatedneedsandmakeappropriate

recommendations.

No.

No.

FPSBEuropeagreeswiththeassessmentofthepotentialevolutionofautomatedadviceasdescribedintheDiscussionPaper.

Basedoncurrenttrends,FPSBEuropesmemberorganizationsseestrongpotentialforgrowthintheuseofautomatedtoolsforfinancialservicesinEurope.

FPSBEuropebelievesthatautomatedadvicetoolsshouldbeacomplementto,butnotareplacementfor,workingwithacompetent,ethicalfinancialadviserorfinancial

plannerwhoactsintheclientsbestinterests.Weseethepotentialforautomatedadvicetoolstosavetimeandmoneyforbothclientsandfinancialplanners,enablingfinancial

advisersandfinancialplannerstoservelowerandmiddleincomeclients,andfreeingfinancialadvisersandfinancialplannerstodevotemoretimetoactivitiesthatbringadded

valuetoclients.However,FPSBalsobelievesthatautomatedadvicetoolshavethepotentialtounderminethevalueoffinancialadviceandfinancialplanning,andcouldlead

morepeopletobecomedoityourselfers,atthemercyofanautomatedsystemthatmaynotbeabletodealwithcomplexityorthatmaynotadviseintheclientsinterests.

FPSBresearchconductedin2014withpractitionersandFPSBmemberorganizationsrevealedthatincreasingly,consumers(particularlyyoungerconsumers)arebecoming

accustomedtousinginformationfrommultiplesources,andthattheydontnecessarilyassumethatanysourceisabsolutelycorrect.Fromamacroeconomicpointofview,

however,FPSBbelievesthatautomatedadvicewouldbemostbeneficialtoconsumersiffinancialliteracywerehighenoughforthemtomakeinformedchoices.Considering

theinconsistentleveloffinancialeducationandconsumerfinancialcapabilityaroundtheworld,itsunlikelythatautomatedadvice(oranyformofadvice,forthatmatter)could

betheperfectsolution.

FPSBEuropeisstronglyoftheopinionthatlegislatorsandregulatorsshouldcreateanexpectationintheEuropeanmarketplacethatifendusersassumetheyaregetting

advice,firmsshouldclassifytheoutputofautomatedadvicetoolsasadviceandregulateautomatedadviceinthesamemannerasinpersonadvice.

PaulGrimes

18.Doyouagreewiththedescriptionofthepotentialriskstofinancialinstitutionsidentified?Ifnot,explainwhy.

19.Doyouconsidertheretobeanyriskstofinancialinstitutionsmissing?Ifso,pleaseexplain.

20.Doyouseeanydifferencesinthepotentialrisksarisingforfinancialinstitutionsineachofthebanking,insuranceandsecuritiessectors?

21.Haveyouobservedanyoftheseriskscausingdetrimenttofinancialinstitutions?Ifso,inwhatway?

22.Wouldyouagreewiththeassessmentofthepotentialevolutionofautomatedadvice?Pleaseprovideyourreasoning.

23.Howdoyouthinkthatthemarketforautomationinfinancialadvicewillevolveinthenearfutureinthebanking,insuranceandinvestmentsectors?Pleasealsoprovidedetailsofanyrelevantdataorinformationtosupportyourviews,whereavailable.

24.Arethereanyothercommentsyouwouldliketoconveyonthetopicofautomationinfinancialadvice?

Contactname



Internalorganisation

AnnualReports

Careers

Budgetandaccounts

Procurement

5thAnniversary

Attributesonresolutionmatters

Topics

Trainingandstaffexchange GlobalSystemicallyImportantInstitutions(GSIIs)

OtherSystemicallyImportantInstitutions(OSIIs)

Riskdashboard

RiskAssessmentReports

ReviewofconsistencyofRiskWeightedAssets

Quantitativeimpactstudy/BaselIIImonitoringexercise

Creditinstitutionsregister

Riskindicatorsguide

PersonalfinanceattheEUlevel

Warnings

Multimediagallery

Presscontacts

Nationalpressofficers

Followuson:

Notifications Links Sitemap Legalnotice

160304_ltr_ESAresponse-FINAL[1]Discussion Paper on automation in financial advice - European Banking Authority

via online submission form re: joint discussion … · via online submission form re: joint...

Documents