Written by Kevin Okell on Thursday 17 March 2016
I was optimistic about FAMR. After years of sitting through tedious debates on the precise meaning of seemingly innocuous terms in the FCA handbook and watching genuinely useful ideas flounder on the perilous rocks of COBS, I really thought HM Treasury would sail to the rescue. With a direct line to the Chancellor I was confident they would see the fundamental mismatch between a new world order founded on personal freedom and responsibility and a paternalistic regulator created in another era. In fact I blogged on this very topic not long ago predicting that FAMR would bring radical change.
How wrong I was. The final report published this week contains 28 recommendations but not one of them could be described as radical. Instead the report calls for 7 more consultations, 2 new frameworks a couple of factsheets plus a task force and an advice unit. The only substantive proposal I can see is to tightly couple the definition of advice to a personal recommendation and thereby align it with MiFID; helpful but hardly likely to herald a digital revolution.
The whole document is a litany of missed opportunity neatly encapsulated by recommendation 10: The FCA should consult on guidance to provide clarity on the standard types of information required as part of the fact find process. In addition, the guidance should also set out key considerations for verifying a fact find that has been performed by third parties. Aside from the insipid wording, the level of ambition inherent in the recommendation as well as the explanatory text that follows is depressing to anyone with an interest in bringing new technology to the world of Financial Services.
In an age when Google is busy investing millions in self-driving vehicles, this feels like the equivalent of giving a cautious welcome to anti-lock brakes. Despite the report’s assertion to the contrary, technology already exists to determine a client’s attitude to risk based on their on-line footprint and, in an increasingly connected world, it seems positively Luddite to insist that a firm “has processes in place to ensure that client information is accurate and up to date” - a bit like having a man to walk in front of your motor car waving a red flag.
Google’s self-driving car receives millions of inputs from all manner of sensors every second in order to make autonomous decisions on what to do next. Closer to home, motor insurers are using mobile phone apps to monitor driving patterns and adjust premiums accordingly. Some progressive life insurers are offering discounts on fitness monitoring devices and using the feedback to monitor health and make lifestyle suggestions to clients. The potential for connected technology to transform our lives is enormous. Except, it would appear, in the retail investment sector.
Despite the King Canute stance, history teaches us that it is impossible to resist the rising tide of technology for long. If the regulator continues to shore up its defences against automating advice then I predict the water will go around them. At the most simplistic level, consumers want to increase their income and reduce their expenditure and financial services products are the traditional route to achieving this. But as technology advances and the world becomes more connected it is increasingly possible to envisage alternative approaches. P2P lending, the sharing economy, pooled purchasing all exploit the power of technology to generate new income streams and manage expenditure. And what is to stop utility firms applying Artificial Intelligence to a combination of feedback from personal devices, intelligent home sensors and energy markets in order to offer consumers a one-off price for their energy for life?
By the time our regulatory dinosaur sees the technology meteorite coming, it will already be too late.
This article first appeared in Professional Adviser 17/03/16
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