Response to joint Comitteee Discussion Paper on automation in financial advice
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In theory, for most consumers, automation in financial advice does not seem more risky than human financial advice. It may also be a significant source of savings for consumers.
However while most related specific risks appear to be properly described in the document, ranging from R1 to R13, some of them need to be further described or completed. The following comments aim at answering question 14 in relation with the listed risks.
Answer to question 14
R5 : Consumers do not understand who is providing them advice because of the fragmented nature of the advice process.
We suggest to complete item 65 by adding :
« The matter exists as soon as an identified person (individual or institution) is not mentioned as the person responsible for the whole information or the whole advice provided, even if several persons or institutions are involved in the process. This concern may be further increased if individuals or institutions involved are not allowed by relevant regulations to provide financial advice in compliance. »
R7 : Consumers make unsuitable decisions due to the limited number of assumptions offered by the tool.
We suggest to complete the first sentence of item 68 with the following one :
« The consumer may not be able to describe adequately his needs by lack of the corresponding elements to input, using the tool. »
We also suggest to add at the end of item 69 :
« The concern is increased if the consumer is not clearly informed that, if he has not been able to input significant elements regarding his needs or his personal situation, the advice provided by automated tools may be unsuitable for him. »
R13 : Consumers may no longer be given the opportunity to access any human financial advice.
We suggest to add an item 79 :
« 79. A serious concern occurs if a consumer thinks that he has not been thoroughly able to understand advice provided by the tool and is not offered access to a human financial assistance in order to overcome his difficulties. This matter would be a further concern if the consumer is not clearly advised by the tool to refrain from trying to take into consideration any advice which he has not thoroughly understood. »
1. Do you agree with the assessment of the characteristics of automated financial advice tools presented in this Discussion Paper? If not, please explain why.
yes2. Are there any other relevant characteristics of automated financial advice tools?
no3. Are you aware of examples of automated financial advice tools being used in the banking, insurance, and/or securities sectors? Please provide examples, giving details of their operating process.
not in France4. Do you offer/are you considering offering automated financial advice tools as part of your business model? If so, please briefly describe: i) what type of entity you are, e.g., long established, start-up, a product provider, an intermediary; ii) the service you provide (e.g. to what extent do you integrate human interaction in the tool you provide?); iii) the nature of your clients; iv) your business model; v) who developed the automated tool (i.e. an external company or developed internally?); and vi) the size of your activity and/or forecast activity?
no5. Do you consider there are barriers preventing you from offering/developing automated financial advice tools in the banking, insurance and securities sectors? If so, which barriers?
no6. Do you consider the potential benefits to consumers to be accurately described? If not, please explain why.
yes7. Are you aware of any additional benefits to consumers? If so, please describe them.
no8. Do you see any differences in the potential benefits arising for consumers in each of the banking, insurance and securities sectors?
no9. Have you observed any of these potential benefits to consumers? If so, please provide examples and describe the kind of benefit that has accrued.
no10. Do you consider the potential benefits to financial institutions to be accurately described? If not, please explain why.
yes11. Are you aware of any additional benefits to financial institutions? If so, please describe them.
no12. Do you see any differences in the potential benefits arising for financial institutions in each of the banking, insurance and securities sectors?
no13. Have you observed any of these potential benefits to financial institutions? If so, please provide examples and describe the kind of benefit that has accrued.
no14. Do you agree with the description of the potential risks to consumers identified? If not, explain why.
Preliminary remarks on potential risksIn theory, for most consumers, automation in financial advice does not seem more risky than human financial advice. It may also be a significant source of savings for consumers.
However while most related specific risks appear to be properly described in the document, ranging from R1 to R13, some of them need to be further described or completed. The following comments aim at answering question 14 in relation with the listed risks.
Answer to question 14
R5 : Consumers do not understand who is providing them advice because of the fragmented nature of the advice process.
We suggest to complete item 65 by adding :
« The matter exists as soon as an identified person (individual or institution) is not mentioned as the person responsible for the whole information or the whole advice provided, even if several persons or institutions are involved in the process. This concern may be further increased if individuals or institutions involved are not allowed by relevant regulations to provide financial advice in compliance. »
R7 : Consumers make unsuitable decisions due to the limited number of assumptions offered by the tool.
We suggest to complete the first sentence of item 68 with the following one :
« The consumer may not be able to describe adequately his needs by lack of the corresponding elements to input, using the tool. »
We also suggest to add at the end of item 69 :
« The concern is increased if the consumer is not clearly informed that, if he has not been able to input significant elements regarding his needs or his personal situation, the advice provided by automated tools may be unsuitable for him. »
R13 : Consumers may no longer be given the opportunity to access any human financial advice.
We suggest to add an item 79 :
« 79. A serious concern occurs if a consumer thinks that he has not been thoroughly able to understand advice provided by the tool and is not offered access to a human financial assistance in order to overcome his difficulties. This matter would be a further concern if the consumer is not clearly advised by the tool to refrain from trying to take into consideration any advice which he has not thoroughly understood. »