Robo Advice and Artificial Intelligence – What is it and what does it mean for your firm?

6th September 2017 844 - Knowledge Library - White Papers

Robo Advice & AI
Robo Advice & AI (PDF)

Robo advice has the potential to affect all financial services firms as it seeks to provide traditional investment and financial services, both regulated (such as advice) and unregulated (such as guidance), cheaper and quicker than traditional firms. It essentially replaces human interaction and decision-making processes with algorithms.

Summary 

With improvements to technology and in particular artificial intelligence, the FCA has had to consider ways in which to regulate these activities – the so called ‘robo advice’. Algorithmic trading has been common place for some time but having a ‘robo advisor’ provide real-time and actionable financial advice has not. The FCA appreciates that artificial intelligence will help customers access affordable advice or guidance but this is not without its challenges. The FCA has considered these challenges as part of its Financial Advice Market Review (FAMR), with a full policy statement expected in December 2017, after consultation. The FCA has also created the Robo Advice Unit to support innovation in this area.

What are the opportunities and challenges? 

In many respects, the opportunities cause the challenges. For example, one of the opportunities of artificial intelligence is the reduced overhead cost of staff conducting routine tasks, such as collecting investment information and risk profiling. However, this leads to job losses and in many instances, investors prefer human interaction,clear decision making processes and good customer service.

Timeline

The next event in this area will be the end of the FAMR consultation period. The FCA will publish their full policy statement in respect of streamlined advice services
(which robo advice is captured by).

Read our article in full: Lawson Conner Robo-Advice and Artificial Intelligence (PDF)

How we can help?

Lawson Conner has worked extensively with its clients to assess the impact of robo advice and relevant regulatory change. We would be delighted to discuss how we can help support your organisation to meet these new regulatory challenges.