On 5 September 2018, the Joint Committee of the European Supervisory Authorities (comprised of ESMA, EBA and EOPA) published a report on the results of their monitoring exercise on ‘automation in financial advice’ (the Report). The Report follows the Joint Committee’s 2015 discussion paper on automation in financial advice, and their 2016 report on the same topic.

The Report presents an analysis of surveys conducted with national competent authorities (NCAs) on the evolution of automation in financial advice in the securities, banking and insurance sectors over the past two years. Section A of the Report summarises the recent work of each European Supervisory Authority in the field of automation and financial advice. Section B sets out the main results of the monitoring exercise. The key findings of the Report are as follows:

  • whilst automation in financial advice seems to be slowly growing, the overall number of firms and customers involved is limited;
  • the risks and benefits of automation in financial advice, which have been identified by the Joint Committee in the previous report and discussion paper, have largely been confirmed by NCAs. Risks noted include automated algorithms being manipulated maliciously, and legal disputes being facilitated by the unclear allocation of liability;
  • barriers preventing the development of automation in financial services include the lack of digital (financial) literacy of some consumers, and the complexity of the applicable regulation governing the field (MiFID II / MiFIR, GDPR etc.); and
  • typically, automated services are being offered, through partnerships, by established financial intermediaries, rather than by pure FinTech firms. Whilst some new trends have emerged (such as the use of Big Data and chatbots), there seems to have been no substantial change to the overall market since 2016.

The Joint Committee sees no cause for action on the topic. A new monitoring exercise will be conducted by the Joint Committee if and when the development of the market warrants it