A review of robo-advice in the UK has identified failings in disclosure and suitability which will require “significant” change to rectify.
The review, carried out by the Financial Conduct Authority, examined firms offering automated online discretionary investment management (Odim) and automated retail investment advice.
Failings included the fact that some firms had not made clear whether they were offering advised, non-advised, discretionary or non-discretionary services.
Other firms had, the survey concluded, presented information on their fees in a potentially misleading way.
“Many firms offering Odim services did not properly evaluate a client’s knowledge and experience, investment objectives and capacity for loss in their suitability assessments,” the FCA said in an update.
“Some firms did not ask clients about their knowledge and experience at all, as they felt their service was suitable for all individuals regardless of their investment knowledge and experience.”
“Some services lacked adequate fact finding and ‘know your client’ focus, instead relying on assumptions about clients. In general, we were not satisfied with the strength of information gathering about clients’ financial circumstances.”
Jon Greer, head of retirement policy at Old Mutual Wealth, said: “The FCA’s review into automated advice has noted some problems with these models, for instance how they can identify vulnerable customers.
“The journey to 24/7 financial advice provided by robots has not been as swift as anticipated and this review offers an opportunity for reflection on how technology best fits within the financial advice industry. Findings from the regulator’s further investigations will be hotly anticipated.”
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