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The ESAs have seen, with the increasing digitalisation of financial services, a growing number of financial institutions offering automated tools when providing advice or recommendations to consumers, often referred to as robo-advisors. These could potentially change the way consumers and financial institutions interact when buying or selling financial products.
The Discussion Paper explains the concept of automation in financial advice, where a financial institution provides advice or recommendations to consumers without, or with very little, human intervention and relies instead on computer-based algorithms and/or decision trees, and highlights potential benefits and risks associated with this particular innovation.
Steven Maijoor, Chair of the Joint Committee, said:
"Financial innovation is important and, at its best, contributes to economic growth. However, this can only be achieved and sustained where consumers have confidence in such innovations. Our role as European Supervisory Authorities is to monitor new financial activities and to take action where appropriate.
"In this Discussion Paper, we recognise that markets are evolving and we want to open up the debate about this potential shift in the way financial institutions interact with consumers."
The potential benefits the ESA's have identified include lower costs, higher consistency of advice and a bigger number of customers that can be reached. While the potential risks could include the inability of consumers to talk to a human advisor who can guide them through the process and provide clarifications, as well as the increased vulnerability to various types of IT failures.
The closing date for responses is 4 March 2016.