Response to joint Comitteee Discussion Paper on automation in financial advice
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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.
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.
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.
- 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.
- Interaction between firms which might exchange easily and share tools and competences.
- It might also be easier for National Competent Authorities to monitor firms.
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.
- 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.
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.
-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.
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.
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 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.
1. Do you agree with the assessment of the characteristics of automated financial advice tools presented in this Discussion Paper? If not, please explain why.
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.2. Are there any other relevant characteristics of automated financial advice tools?
We have no additional characteristics to add for automated financial advice tools.3. Are you aware of examples of automated financial advice tools being used in the banking, insurance, and/or securities sectors? Please provide examples, giving details of their operating process.
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.
4. Do you offer/are you considering offering automated financial advice tools as part of your business model? If so, please briefly describe: i) what type of entity you are, e.g., long established, start-up, a product provider, an intermediary; ii) the service you provide (e.g. to what extent do you integrate human interaction in the tool you provide?); iii) the nature of your clients; iv) your business model; v) who developed the automated tool (i.e. an external company or developed internally?); and vi) the size of your activity and/or forecast activity?
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.
5. Do you consider there are barriers preventing you from offering/developing automated financial advice tools in the banking, insurance and securities sectors? If so, which barriers?
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.
6. Do you consider the potential benefits to consumers to be accurately described? If not, please explain why.
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.
7. Are you aware of any additional benefits to consumers? If so, please describe them.
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.
8. Do you see any differences in the potential benefits arising for consumers in each of the banking, insurance and securities sectors?
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.
9. Have you observed any of these potential benefits to consumers? If so, please provide examples and describe the kind of benefit that has accrued.
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.10. Do you consider the potential benefits to financial institutions to be accurately described? If not, please explain why.
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.
11. Are you aware of any additional benefits to financial institutions? If so, please describe them.
We believe that the reducing of staff and an easier and faster recording can be considerate as potential benefit for financial institutions.12. Do you see any differences in the potential benefits arising for financial institutions in each of the banking, insurance and securities sectors?
No.13. Have you observed any of these potential benefits to financial institutions? If so, please provide examples and describe the kind of benefit that has accrued.
We have not observed any of these potential benefits.14. Do you agree with the description of the potential risks to consumers identified? If not, explain why.
In general manner, we agree with description of the potential risks to consumers.15. Do you consider there to be any risks to consumers missing? If so, please explain.
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.
16. Do you see any differences in the potential risks arising for consumers in each of the banking, insurance and securities sectors?
We consider that it could exist a lower Risk level in the insurance sector.17. Have you observed any of these risks causing detriment to consumers? If so, in what way?
No.18. Do you agree with the description of the potential risks to financial institutions identified? If not, explain why.
We agree with the description of the potential risks to financial institutions.19. Do you consider there to be any risks to financial institutions missing? If so, please explain.
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.
20. Do you see any differences in the potential risks arising for financial institutions in each of the banking, insurance and securities sectors?
No.21. Have you observed any of these risks causing detriment to financial institutions? If so, in what way?
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.
22. Would you agree with the assessment of the potential evolution of automated advice? Please provide your reasoning.
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.23. How do you think that the market for automation in financial advice will evolve in the near future in the banking, insurance and investment sectors? Please also provide details of any relevant data or information to support your views, where available.
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.
24. Are there any other comments you would like to convey on the topic of automation in financial advice?
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.