Robo-Advice - Regulatory Uncertainty Down, Commercial Challenges Up

In our report "The next frontier - the future of automated financial advice in the UK", published in April, we noted that a key regulatory challenge for firms in providing automated advice is understanding which side of the "advice boundary" their services fall on – guidance or regulated advice. We argued that the success of automated models in the UK would therefore depend, in part, on how much clarity the Financial Conduct Authority (FCA) would be able to provide about where the boundary lies.

In order to provide this clarity, in August, the FCA published its updated draft guidance on the amended advice perimeter. In our view, the proposed changes and guidelines do make it much easier for firms¹ to understand where the advice boundary is. However they also make much clearer the fact that several of the advice scenarios whose status was previously "uncertain" are in fact regulated advice and therefore are subject to suitability requirements.