ANACOFI agrees with the assessment of the characteristic of automated financial advice tools accurately. Nevertheless, we consider of a great importance to consider a “legal” definition of “advice” and not a “common” definition. If not, we can’t compare and we can’t have a “normal” debate about automated financial tools versus a so call “former” or “classical” way to deliver advices.
We have no additional characteristics to add for automated financial advice tools.
Yes, we are aware of some examples of firms which use automated financial advice tools in the securities sector and insurance sector.
In securities sectors, we know the following firms: Marie Quantier, 1.2.3 OPCVM, les meilleursfonds.com for our category of professionals and almost 3 others majors for asset managers.
In insurance sectors, we are aware of plenty of and we know very well the following firms: Yomoni, Funshop, Advize.
Some firms provide tools for others from different professional worlds like Harvest, 1.2.3 OPCVM and Netvox.
Our members provide advice services in the securities, insurance and banking sector. Some of them provide advice in real estate. In majority, their activities integrate both human advice and tools.
Their business model is varied and even some firms fully automated, offering as a direct advice (to client) are also “manufacturers” for tools providing them to other firms, whatever could be their model (human or automated).
Our members represent €2 billion turnover.
We consider some barriers we must take into consideration. Firstly, two mains barriers have to be highlighted: access to technology and cost for automated tools.
Facing the reality, developing an automated tool in a firm need considerable effort in RD or for what we understand from the market, incredible costs because of integration of companies or technologies. Moreover, most part of the efficient technologies are not available without license: it will be necessary to obtain it.
Then and after, firms might update the various automated tools and licenses they bought. We noticed regarding our member’s activity that it is much more expensive than automated tools themselves. Therefore, human advice does not disappear. In some case, it comes back.
We also have to consider that some customers do prefer and need human exchange.
Finally, for cross border case, we can’t deny the fact that automated tools must comply with the jurisdiction’s law concerned. It seems not so easy.
We consider some benefits are not accurate:
- B1: in fact, the service is cheaper because there is not human being. the client pays for the service provided. Less service, less costs, less jobs.
- B3: We consider the benefit for the client which consists to have access to a wider range of service providers without regard of where they are, have to be qualified. In fact, customers can access to only products legally available. Many old fashion platforms can still offer that. If we are talking about un understandable or illegal offers, we are facing a problem.
- B4: we do not agree with the ESAs opinion. In our opinion, it’s not necessary easier for consumers. All professional must complies with a level playing field. Therefore, if online automated tolls may present information to consumer in a “short and digestible way”, we have doubt about the quality of the service provided to consumers. Every professional, automated or not, must give some “defined” information. If automated firms are allowed offering “shorter and more digestible” information or advice than other licensed firms, they are not compliant and full stop. End of our debate.
- B5: we think that consumers don’t receive a more consistent advice with an automated financial advice tool especially if the tool present information in a short and digestible way as it was said before (B4). You might consider than “modern” advisors (most cases) work with tools. Time for only paper shit and pen is over. They have got tool, training, process and controls.
- B6: we consider that benefit concern “every financial adviser” who have tools permitting to base their advice on an up-to-date information. It makes a long time.
- B7: This point is totally incredible. How could have been forgotten that all financial adviser must to record the advisory process and give some reports. So, it’s not a relevant benefit.
We could of course consider additional benefits to consumers:
- Interaction between firms which might exchange easily and share tools and competences.
- It might also be easier for National Competent Authorities to monitor firms.
We notice differences in the potential benefits regarding the various sectors. In the banking sector, automated tools allow a better comparability for services and loans.
In the insurance sector, it allows to easily purchase a contract online and to benefit from high quality of risk assessment.
In the securities sector, the relevant benefit is the market assessment and asset allocation.
We have observed professionals already working with automated tools. They have access to information in a real time and they can provide information and react faster. In some ace, they can also be much more compliant.
We have some observation about the potential benefits to financial institutions:
- B8: we consider firms have important costs particularly of up-to date tools. Firms must conduct periodically assessment. The 40’s paragraph and argument is totally false. The theory of “meeting the cost of system development” is a dream in a moving system in various technological directions. Only major or for a short period, small firms borne from research can achieve it. And the becoming of client’s data is something we have to keep in mind.
- B9: we think that benefit exist since the earliest days of the internet or even of … advertising.
- B10: we believe that delivering a consistent experience is not a new benefit relating to the quality of service.
- B11: we share the ESA’s point of view but this benefit concerns all adviser. They must keep record of all their process.
We believe that the reducing of staff and an easier and faster recording can be considerate as potential benefit for financial institutions.
We have not observed any of these potential benefits.
In general manner, we agree with description of the potential risks to consumers.
We believe that some risks may not have been taken into account. One risk, may be, is due to obsolescence for automated tools which is fasten year after yearn waiting for “norms”.
It could also appear a risk of lack of updating information about the consumer’s personal case. If the costumer’s situation changes, the automated tools may not alert costumers for update their information and if no one exchanges with the human consumer, no new information or less change to obtain it. A human adviser can easily put in place and manage a process in order to update the costumer’s profile and by the fact, update advices.
We consider that it could exist a lower Risk level in the insurance sector.
We agree with the description of the potential risks to financial institutions.
We would propose additional risks for financial institutions:
-Risk of project delay: if tools are not ready to start on time, costs are often far from a common level and can make the firm fray. It causes additional costs but also trouble for clients and could be dangerous even for the “brand” because of its credibility.
-Every time tools changed or are being improved, you have chances to see the number of claims growing up very quickly because customers just don’t know how to use it. And you have to manage it.
We are aware of delay in the launch time of new project or in setting up new tools. In this case, human intervention will often be necessary and essential for resolving this problem and it drives to recruitments in a very bad and emergency situation. So humans are in that cases coming back to correct automated tools inefficiency.
The worst is when the projects about tools are stopped. In that case, often it appears that small firms cannot survive at a major technological breakthrough.
We agree with the assessment of the potential evolution of automated advice. However, a market comparison with US market may not be appropriate: many differences exist (regulation, culture, agreement…) and especially the language frontier.
We think tools may be taking in charge a growing part of the job.
But, few firms would be able to exist in a full automated model.
Most part of the market might be made of a mixed model between humans and tolls.
Ah a result, employment would be reduced but not necessarily the number of firms.
Tools manufacturers or providers could become essentials in the evolution of the market and also networks or partaged technological and products/services.
We have to take care of numerical illiteracy which means mistakes from clients and probably an incredible level of after selling service with … humans.
We are involved in the national assessment works (several) aiming to drive or to think about that sort of market. And what we can see is a great number of projects and technologies, not so often compatible with others.