The Financial Conduct Authority (FCA) has quizzed robo-advisers about their financial reports and how they disclose charges since it criticised the sector last year.
Despite this heightened regulatory scrutiny, the FCA has not taken any formal enforcement action against robo-advisers.
Last May the FCA published its review of seven robo-advisers, which criticised them for not gathering enough information about clients before they invested (including household debts) and for ‘unclear’ charges disclosure.
A freedom of information (FOI) request by New Model Adviser® has now revealed that since that report the FCA has been quizzing robo-advisers over their financial accounts and compliance with cost disclosure rules since the report.
‘Our Supervisory and Strategy & Competition Divisions have engaged with online discretionary investment management (ODIM) firms during the relevant period [May to January] on many matters, such as reviewing financial promotions, reviewing firms’ reports and accounts, assessing firms’ compliance with costs and charges disclosure. This includes the seven firms involved in the ODIM multi-firm review and other ODIM firms.’
However, the FCA has not taken any ‘formal regulatory action (such as opening enforcement investigations or issuing final notices)’.
The FOI said the FCA’s enforcement division has not visited any robos over the period and neither has it refused any firms’ applications to enter the market.
Simon Bussy, director of Altus Consulting, said the FOI shows the regulator is ‘broadly happy’ with the progress made by robos following its suitability review.
‘Since the review we’ve seen firms make changes to their disclosures and suitability processes,’ Bussy said. ‘For example, more firms are making clear what their charges are in pounds and pence, rather than in basis points or percentages.
'It would appear the FCA is broadly happy with the progress made, certainly to a point where further intervention has not been required. We would expect the FCA to keep an eye on this evolving market, particularly as new players emerge, to ensure that the lessons learned from the reviews last year are followed and implemented.’