We broadly agree with the categorisation of automated financial advice as set out in the DP.
The Joint Committee should note that most advice tools described in the DP tend to be “point in time” tools which evaluate the circumstances at a particular instance and circumstances. We believe that further value can be generated from considering: 1) how these tools link together in creating a broader financial picture; and 2) how these tools can be used to track, evaluate and prompt a user to take subsequent action. For example, as time passes and the overall sum of investments grows, there might be a need to re-evaluate tax consequences or to alter your asset allocation as the time to retirement decreases.
Our experience has shown that many different kinds of automated services are being offered today, that vary enormously by firm and between industry sectors and jurisdictions. We have found that the use of automated services is much more developed in North America than in the EU. We would be happy to share our experience designing and building services associated with the automated advice process that operate in many different jurisdictions if the Joint Committee would find it useful.
Markit On Demand has focused on the presentation of financial information and tools for nearly 25 years, particularly focused on the retail investor (having been acquired by Markit in 2010). As one of the world’s largest employers of web designers focused solely on the presentation of financial data and workflows, we are experts in designing, developing and hosting solutions for users to make informed investment decisions in a timely manner. During a typical week, our services support more than 2.3 billion page views of dynamic content and more than 2.5 million unique users log into the pages we host. Markit On Demand’s unique position as the provider of technology services to a large number of asset and wealth managers and other investment professionals in numerous jurisdictions means we have broad-based experience of how financial institutions connect and interact with their clients.
As we have highlighted in other sections, the automated advice sector in the EU is less developed than in some other jurisdictions, particularly when compared to North America. Our experience suggests that a lack of regulatory clarity around the classification of robo-advice services is holding back investment in anything but the most cursory of services in the EU. As well as holding back the development of the sector, this situation stops providers well short of being able to provide any meaningful insight, education or guidance. We therefore encourage the Joint Committee (and legislators) to provide the clarity that would allow portals to offer contextual information, education and customised guidance for potential investors prior to any sales process and formal advice process being offered.

Additionally, the Joint Committee should take into account demographic considerations around the use of automated services. Specifically, as described in a recent wealth management report from Capgemini, individuals under 40 years of age tended to have a lower level of confidence or trust in their wealth manager and associated firm compared to their older counterparts. The same report found that those in that same younger age bracket were also more likely to use automated advisory services and place a premium on the digital offering from their firm. (United States Wealth Report, December 2015,
While we generally agree with the benefits that the Joint Committee outlined in the DP, we recommend it consider three further benefits:

• First, educational value. Levels of financial literacy in the population are generally low and, regardless of whether the person ultimately takes formal advice, using robo-advice or guidance services potentially has educational benefits for consumers. We believe that simple to use, accessible websites can allow investors to receive examples of different investment options open to them and enable them to either make a more suitable investment decision or realise that it would be worth seeking more tailored advice.

• Second, technology enables investors to move away from the idea that choices about investments and financial advice are a one-time event. We believe that investors need to be able to – and should be encouraged to – stop seeing financial planning and advice as something that happens only as a one-off (i.e. a decision that is made once and then forgotten about). Instead, advances in information technology and well-designed websites now make it much easier to maintain a continual engagement and access to information about the performance of investments and initiate changes over time whenever desired or necessary.

• Third, less affluent consumers will benefit as the marginal costs of extending a service build for higher-worth clients to lower-worth individuals would be relatively low. We believe it is the potential scalability of solutions target at high worth clients that means services could become available for the greater number of individuals with less complex needs (or lower investment amounts) that would otherwise not attract developers because of high costs of developing specific solutions. We therefore recommend the regulatory framework encourage (for example by making it simple to extend services to different target markets) this kind of cross subsidisation.
We agree with the risks to consumers that the Joint Committee set out in the DP. However we would comment that the risks identified are general risks of financial advice or internet use more generally and this highlights that the regulatory framework for advice, however it is delivered, should be compatible with the way people organise their life in contemporary society. It is also worth considering that in many areas of business, practices have migrated to being more web-based and so many of the issues that become more concerning with web based solutions, for example cyber security or liability around contracted out services, have been adequately resolved elsewhere.
Our views are based on the experience we have gathered working with our many clients in North America and Australia as well as the feedback we have gathered when working with potential users of our services in Europe. We would generally recommend that the Joint Committee aim to develop a framework that allows people access to a flourishing digital market and enables the benefits of technical solutions built for higher net worth individuals to be made available, with the appropriate protections, to people with fewer assets. We believe that such approach would help reach a larger number of potential investors who would benefit from advice and guidance, but, with fewer assets, advisors may not target them specifically.

As we have stated above, we believe that the Joint Committee should provide greater clarity to the industry as to what is “guidance” or “education” and what will be seen as regulated advice. Clear markers between categories would help. We believe that investor protection is absolutely vital and asset managers should take responsibility for the information they provide to their clients. However we also believe that an overly protective system, especially around educational material, will ultimately lead to detriment.
David Cook