The Financial Conduct Authority needs to urgently apply the brakes on the robo-advice sector if it wants to protect consumers, SCM Direct has warned.
SCM Direct carried out research on robo-advisers and found that they may create more problems than they actually solve.
The findings of this research report leads SCM Direct to believe that the FCA need to systematically review this nascent sector.
But instead they announced on 5 July 2016 that they are setting up a robo-advice unit and allocating it £500,000.
In the US, the Massachusetts regulator has recently warned that robo-advisors may not be able to deliver “appropriate” investment advice as there is no checking whether the information given by clients via electronic questionnaires is accurate.
The Secretary of State for Massachusetts, said: “Entities that create computer-generated portfolios but fail to do the necessary due diligence to know their customers and who specifically decline most if not all the fiduciary duty is not performing the duties of investment advisers”
Gina Miller, co-founder of SCM Direct and the True and Fair Campaign said: “Our conclusion is that there is little evidence of robust innovation, as new robo-advisers appear to be fundamentally financially unviable and/or seem to be regularly flouting key FCA rules.
“It’s time the FCA to step in and protect consumers from the various issues raised in our report, which their US regulatory peers are already addressing.”