Robo-advisers – or ‘robo-asset managers’?

Robo adviserRobo-advisers would be better designated as ‘robo-asset managers’ it is claimed in a report about the nascent area of computer-generated financial advice.

Better Finance, a non-governmental body representing individual investors, said nearly all the providers it researched in Europe were registered as financial advisers – but many were also registered as asset managers or had a contractual relationship with a registered investment company.

“Therefore, terms such as ‘robot investing’ or ‘robot investment management’ would designate this emerging business more appropriately,” Better Finance says in a report.

European regulators should more precisely define “investment advice” and, more specifically, the definition of “personal recommendations” that constitutes what financial advice means and which is found in the Markets in Financial Instruments Directive, Better Finance says.

Better Finance, whose full name is The European Federation of Investors and Financial Services Users, produced the report in response to the Joint Committee of the European Supervisory Authorities’ discussion paper on automation in financial advice, which was issued in December. The joint committee includes the European Securities and Markets Authority.

The research also found that robo-adviser fees were much higher in Europe than in the US, but compared favourably to traditional adviser fees.

Overall robo-adviser fees in the US were between 12 and 99 basis points compared to fees between 69 and 169 basis points in Europe.

Part of the reason is that robo-advisers are still in start-up mode in Europe compared to the US, where they have been around longer.

Better Finance is favourable towards robo-advisers, saying that in an environment of low capital market returns, these new players could make a “real difference on the actual performance of financial advice and investment management and protect the real value of people’s savings”.

©2016 funds europe