FCA: robo-advice won't prompt rule changes

The FCA's policy director, David Geale, says that robo-advice won't prompt changes to existing rules, but admitted that providers need further clarity.

Related topics:  Finance News
Rozi Jones
15th September 2016
FCA
"They need to give their consumers something they want to read and pick up and move away from a paper-based mind-set."

Speaking at a Boring Money conference, Geale confirmed that the FCA plans to publish a series of case studies to help providers structure their robo-propositions correctly.

He said a key concern was the strength of the underlying algorithms, adding: “If the algorithm goes wrong, it can go wrong very quickly.”

Geale also commented on client communications, saying asset management groups needed to respond effectively to changing consumer decision-making patterns. He said that effective communications have a vital role in helping consumers make decisions and understand the consequences of those decisions.

However, he added that asset managers must recognise that consumers are not a uniform group with identical needs. He points to research suggesting that only half of UK adults have the numeracy levels expected of an 11-year old, while 16% can’t find the balance on a bank statement.

Geale said: “Good practice might be to include graphics to help consumers to understand features and benefits, or apps to help consumers engage with and manage products. Asset managers need to think about tailored communications for specific demographics, videos and infographics, engaging in ways people can remember. They need to give their consumers something they want to read and pick up and move away from a paper-based mind-set.”

Holly Mackay, founder of Boring Money, commented: “it is clear that asset managers may not be communicating with clients in a way they understand. Our research with the Telegraph says that only a quarter of Brits hold risk-based investments and, of those, only around 20% of people are comfortable with doing so. In other words, they are buying funds, but they’re not happy about it. Asset managers need to find a new way to talk about investment.”

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