Weekend Argus (Saturday Edition)
Tough regulatory requirements proposed for robo-advice
DURING recent regulatory update workshops, Billy Seyffert, the chief operating officer of Moonstone Compliance and Risk Management, alluded to rather stringent requirements for financial services providers (FSPs) who plan to go the robo-advice route.
The Financial Planning Institute (FPI) recently conducted a robo-advice survey. Nearly half the respondents indicated that they believe that regulators should monitor the standards governing robo-advice.
The proposed new fit and proper requirements under the Financial Advisory and Intermediary Services (FAIS) Act include guidelines on what will be required to operate in this space. An FSP who wants to provide automated advice must have at least one key individual who:
• Meets the competence requirements applicable to a key individual of a Category I FSP; and
• Has technological knowledge, skills and experience to:
– Understand the technology and algorithms used to provide the automated advice;
– Understand the methodological approaches and assumptions embedded in the algorithms and the rules underpinning the algorithms;
– Identify the risks to customers arising from the automated advice; and
– Monitor and review the automated advice generated by algorithms to ensure the quality and suitability of the advice and compliance with the FAIS Act.
The topic will be discussed in detail at the FPI Professionals Convention next week. Paul Kruger is editor and writer-in-chief of the Moonstone Monitor, the Moonstone Investment Indicators and the Moonstone Online website.