A firm in the Financial Conduct Authority (FCA) regulatory sandbox is currently testing a proposition which uses facial recognition technology to feed into the risk profiling assessment being carried out by advisers.
In a report published today, the FCA announced that its regulatory sandbox had helped reduce the time and cost of getting innovative ideas to market, and shed light on some of the innovations being tested.
The sandbox project opened for applications in June 2016, and enables firms to test innovative products in a live user environment. It has received 146 applications in total, 50 of which were accepted with 41 progressing to testing, which has been run in two cohorts.
The regulator also revealed that a number of robo-advice firms have progressed to testing, drawn on the expertise of qualified advisers to enable burgeoning robo firms to ensure advice suitability, with the help of its Advice Unit.
One firm is currently testing the automation of the end-to-end advice process.
According to the report, once a consumer submits their response to the online fact-find, they automatically receive their suitability report. In order to test this while avoiding the consumer acting on unsuitable advice, consumers are informed that they should not act upon the report until they have received a second notification confirming that the advice is suitable.
This allows the qualified financial adviser to check the output of the model and enables the firm to test their proposition effectively.
The report states: 'To mitigate risks that these models deliver unsuitable advice, we have ensured that firms build in additional safeguards before they begin testing. In most cases, this has involved qualified financial advisers checking the automated advice outputs generated by the underlying algorithms.'
The report highlights that 75% of the firms accepted into the first cohort have successfully completed testing, with 90% of those progressing toward a wider market launch.
At least 40% of firms which completed testing in the first cohort received investment during or following their sandbox tests.