High accessibility and availability, greater independence, reduced costs... The financial robo-advisor sector continues to grow and has the potential to appeal to retail investors, according to a new report published on Monday 25 January by BETTER FINANCE, which covers 13 European and four non-European platforms.
According to BETTER FINANCE, robo-advice has the power to democratise finance and promote financial inclusion by also allowing savers to access investment products with a single click. Most of the robo-advisors analysed in the report also do not have the same conflicts of interest as traditional financial advisors, most of whom are paid on a commission basis for the sale of certain products, she points out.
However, despite these multiple advantages, the market has not grown as fast as expected, due to a general mistrust of financial services and the low level of financial education of individual investors, the organisation regrets.
To remedy this, it proposes a series of recommendations that would reassure investors, including the establishment of a European legislative framework for automated decision-making based on artificial intelligence to ensure that it is fair, transparent and accountable to consumers.
More broadly, BETTER FINANCE recommends that the European Commission carry out a thorough review of the adequacy of all relevant European legislation in the financial, insurance and pension sectors with these new technological developments.
In her view, the MiFID II framework in particular should be modified. Specifically, the definition of “investment advice” should be reviewed to clarify exactly when a recommendation is considered “advice” and what “personal” means. European legislation should also require all investment advisors to disclose the actual costs, risks and performance of financial products.
The EU should also set up a pan-European investor protection awareness programme, the organisation suggests.
See the report: https://bit.ly/3qVsfRv (Original version in French by Marion Fontana)