Out-Law News 1 min. read

New robo advice unit to be operational next month, says FCA


A new regulatory unit to help firms develop compliant 'robo advice' tools will be operational next month, the departing chief executive of the UK's Financial Conduct Authority (FCA) has said.

Tracey McDermott said the regulator did not want to wait to set up the new unit, which she suggested be established as part of the Financial Advice Market Review (FAMR) recommendations she and Treasury director-general of financial services Charles Roxburgh outlined last month.

"The advice unit will support the development of automated advice tools that can help provide low cost, high quality advice to mass-market consumers on investments, pensions and protection," McDermott said in a recent speech. "It will be open to firms of all sizes, linking up with our work on Project Innovate."

"We will initially be giving eligible firms feedback on how their advice models can meet regulatory requirements and expectations. We have done this in the past, but we want to make it clear that we want to offer this support more widely and make it more routine. And we want to ensure that other firms can benefit from what we learn about what works, and what doesn’t, as we go through this process," she said.

McDermott said the FCA also plans to develop tools and resources such as "standardised testing scenarios" and make them available for firms to use later this year to help them "gauge the effectiveness of their models".

McDermott said that whilst there is "no ‘silver bullet’, no perfect solution to close the advice gap" that exists, technology is one tool that can be used to help ensure the market "provides affordable advice and guidance for everyone, at all stages of their lives".

"As well as stimulating a more engaging and cost-effective advice market, automated advice offers the chance of ensuring consistent outcomes, thanks to automation and the ability to minimise the risk of human error," McDermott said.

"It’s not just about automated advice - technology can also play a role in traditional advice. For example, development of portable fact finds and shortening overly lengthy suitability reports, which FAMR recommends, could lead to real progress in reducing the cost of traditional face-to-face advice," she said.

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