The Society of Pension Professionals

In principle, yes.

However, we consider that the examples of home and motor insurance, referred to in paragraph 26, would not be viewed as describing advice in a UK context, but would be more in the nature of an online execution only service.

We suggest that it is important to maintain a clear distinction between advice and online broking. Under the latter there is no personal recommendation, simply a decision by the consumer based essentially on price.

Development of automated advice in financial services varies greatly across the EU member states, with some markets being significantly more advanced than others. It is therefore important that any assessment made by the European Supervisory Authorities (ESAs) considers the considerable differences between member states.

Automation in advice does not have to be an “either or” scenario between full automation or traditional advice. It is most likely that most models adopted will be a hybrid of the two.
No. However, we believe that MiFID definitions of regulated advice should determine what constitutes an automated financial advice tool. Therefore, if the output of an online tool falls outside the MiFID definition of regulated advice, as is the case with a UK general insurance price comparison website, it is not an automated financial advice tool. It should instead be considered as a tool undertaking the activity of ‘digital distribution’.
The only tool of which we are aware in the pension field in the UK is Wealth Wizards.

Although not relevant to the current UK pensions market, we suggest that Stakeholder Pension decision trees formerly in use might constitute an example of an automated financial advice tool.
This question is not relevant to a representative body such as the Society.
We suggest that the key need at the outset will be for a clear understanding from their national regulator among advisers and providers of what constitutes advice in an automated context. Also of concern will be regulatory expectations and how these are perceived by complaints referral bodies such as the Financial Ombudsman Service. In particular, how much responsibility consumers take for the responses they give and warnings provided to them.

Other key factors, which may be considered before offering or developing automated financial advice tools, could include upfront costs, regulatory requirements, and concern about potential liability
We consider that the potential benefits are accurately described in respect of engaged consumers who are comfortable with online interaction.

The benefits will be less for people who are not comfortable online or who have limited internet access.
No.

In our view the main benefit is likely to be that consumers pay less when they receive advice through automated tools.

A further additional benefit, which should be considered, is the capacity for automated tools to help consumers explore their own rationale and potential biases. Automated financial advice might also be more attractive to consumers, given the level of control they have when it comes to interacting with the service. For example, where a service requires a consumer to input their own information, when undertaking a fact find, the consumer is essentially empowered and in control of that process.

For automated advice to be effective, however, it will be essential that it is promptly updated to take account of any changes in the market, for example on taxation. Paragraph 38 perhaps goes some way to recognising this point.
We have no comments on this question.
We have no comments on this question.
Yes.

From a practical point of view, certainly in the UK context, the view of professional indemnity insurers on the potential benefits and risks of automation in financial advice will play a fundamental part in determining whether a market develops.
In the pensions area a possible benefit might be greater pension scheme participation and saving.
We have no comments on this question.
We have no comments on this question.
Yes.
There might be potential risks depending on where the data analytics underlying the automated advice are carried out.

There is also a possible risk that consumers will not have the ability to refer back to the “paperwork” they completed at the time of the application. For example, if someone completes an application online and the take-on process does not include sending them (either by post or e-mail) a copy of their answers or perhaps the material they read on the site changes over time, they will not be able to go back and look in the same way as they would with a paper-based process.
We have no comments on this question.
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Yes.
There will need to be certainty on for how long data should be kept and the mechanics of pulling together possibly dispersed data for deletion could be complicated. There is also a possible risk that consumers, transacting more and more business online, are exposed to a higher risk with use of multiple and excessive numbers of passwords and security protocols, which discourage them from transacting online.

The risk of providing guidance, which could later be deemed to be advice causes legal uncertainty and risk. This risks making digital propositions less attractive relative to the commercial benefits. The ESA’s proposed broad scope as to what constitutes automated financial ‘advice’ is not helpful in this regard and contributes to the uncertainty for firms.

An additional risk, which should be considered in the context of problems relating to an algorithm, is the potential for assumptions in the algorithm itself to effect the recommendation to the consumer.
We have no comments on this question.
We have no comments on this question.
We have nothing to add to the commentary in the discussion paper.
In the UK context perhaps the main near term determinant of how the market will develop will be the outcomes from the Finance Advice Market Review.
No.
John Mortimer
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