The regulator should stop pandering towards banks when it develops rules for robo-advice, evestor chief executive Anthony Morrow has argued.
The Financial Conduct Authority (FCA) recently published new guidelines setting out the difference between guidance and advice. The proposals were made as part of the financial advice market review (FAMR) in order to make it easier for firms to offer low cost services, particularly online investment propositions.
Anthony Morrow (pictured), chief executive at evestor, said the FCA should stop favouring banks when setting out its rules for mass market offerings.
‘All this chat around guidance and firms saying we want rules around that, that is all these financial services businesses not wanting to take on the risk or liability of making a recommendation but still being quite happy to part the customer with their money,' he said.
‘Time and effort would be better served elsewhere rather than trying to pander to the large institutions who historically have not served customers particularly well, i.e. the banks which have all launched their own ‘robo-advice’ which is not actually regulated advice,’ said Morrow.
Morrow said there are not material barriers to setting up regulated online advice propositions, such as evestor.
‘There is no regulatory reason why an automated service cannot provide regulated advice.
‘If they say they cannot they are basically lying. What they are saying is our internal business model will not accommodate taking on board risk in giving customers financial advice,’ he said.
The FCA has been working to establish clear rules around guidance versus traditional advice, with the former being a non-regulated activity. It has been a central issue on the Financial Advice Market Review, a joint review by the FCA and Treasury into how to make advice and guidance more accessible.
‘If [evestor co-founder] Duncan Cameron and I can build a business to provide financial advice to customers then banks should be able to.
‘The only reason is absolute greed. There is probably an argument to say if, and it is a massive if, interest rates went up three or four percent, would the banks even be bothered because at that sort of rate they would probably still be getting a 2% margin on current accounts which is more than they would make on these new robo-advice things, and with absolutely no risk there,' he said.
Morrow told New Model Adviser® this week evestor was not averse to telling people to invest in cash if that is most suitable for them. He is sceptical about the pressure consumers are put under to invest in equity.
‘I get really annoyed when I see adverts trying to attract cash from people wanting to invest for a couple of years.
‘People say you are losing money when you save in cash because of inflation but most consumers do not bloody care if they have lost £1 from the £240 they have saved over the year. But they are bothered if they only have £220 and do not really understand why they have lost £20 [to fees and charges].’