Some of the largest robo-advice firms in the UK are planning to unite in an effort to lobby the government and Financial Conduct Authority (FCA) for softer regulation of the sector.
New Model Adviser® has learned that Wealthsimple, Wealthify, Investec Click & Invest, Moneyfarm, Nutmeg and Scalable Capital plan to meet in the next month as a precursor to a joint lobbying effort to the government and the regulator.
A source familiar with the situation said the meeting was evidence of how the FCA’s recent suitability warning was hitting robo-advice firms’ business models.
In May the FCA released findings from a review of the automated online discretionary investment management sector, which was highly critical of firms’ suitability.
The regulator’s report found robo-advice firms were not properly getting to know their clients’ investment objectives or capacity for loss in their suitability assessments. In some cases firms were not requesting information about clients’ debt.
New Model Adviser® understands the plan was to discuss some of the challenges brought up by the FCA’s report on robo suitability. The meeting would be used to unite the firms in a joint effort to liaise with the FCA and government to try and stop over-burdensome regulation of the sector.
Wealthify, which was acquired by Aviva last year, is taking a lead role in the organisation of the robo firms’ lobbying efforts.
New business issues
The FCA’s paper has caused issues for some robo firms’ ability to acquire new clients, one source told New Model Adviser®. In particular the regulator’s warning that robo-advisers need to collect enough information about potential clients’ financial circumstances has held back growth for the companies.
‘It is clearly causing issues as to how they are engaging with customers and the suitability of the products the customers are taking out,’ they said.
Richard Theo, Wealthify’s chief executive, said it was normal for robo firms to meet to discuss ‘issues that are affecting the market as a whole’.
‘We regularly keep in contact with the other robo-investment platforms,’ he said. ‘There aren’t a huge number of providers in this area so, naturally, we all know each other. It’s therefore not unusual for us to discuss issues we are facing in the market. The shared benefit of cooperating is that we collectively help to make robo-investing services accessible to wider audiences.
‘Equally, we have ongoing, regular and open dialogue with the FCA. In some cases it may be appropriate to collaborate with other robos when addressing issues that are affecting the market as a whole.’
Toby Triebel, Wealthsimple’s Europe chief executive, said: ‘We have an ongoing open dialogue with all the digital investment platforms in the market. We speak regularly with each other, and with the FCA, on industry topics or issues that impact our business.’
A Nutmeg spokeswoman said: ‘We’ve always spoken regularly to other providers joining a growing market. There isn’t anything unusual about that. As an early mover in the sector, we've also had an ongoing conversation with the regulator since 2011. We don't see that changing in the future.’
A Moneyfarm spokeswoman said: ‘As with any industry, Moneyfarm does speak with other robo-advisers and maintains regular contact with the FCA.’