Back in 2016 the Bank of America raised an interest in financial robo-advisory. Two years later, Wealthfront was the first fully automated advisor offering free, personalised financial planning for its customers.
According to the Business Insider Intelligence, by 2022 robo-advisors will be managing USD 4.6 trillion1. Robo-advisory is a good chance to speed up financing processes and to avoid analytical errors which could be made due to human tendencies like prejudices.
In May 2020 the Polish Financial Supervision Authority (Komisja Nadzoru Finansowego; "KNF") issued a first draft statement on robo-advice in investment planning ("Statement"). As explained in the Statement, robo-advisory is a form of automated financial consulting usually applied in the areas of investment advice, loans and insurance. The solution is based on advanced algorithms, artificial intelligence (AI), machine learning and tools for analysis of large data sets (Big Data).
Robo-advice aims at reducing costs of financial consulting services (so that they can be accessible to a broader range of clients), as well as increasing the efficiency. However, along with those advantages come new challenges such as new legal regulations, securing the issues of liability for potential damages incurred due to the use of AI.
"Robo-advisory is a good chance to speed up financing processes and to avoid analytical errors which could be made due to human tendencies like prejudices."
KNF in its Statement, notes that currently there are two main approaches and models of robo-advisory activities used by financial entities. These include: (i) full automation of investment advice services by rendering such services fully over the internet (from initial testing to final investment recommendation); and (ii) automation of the investment recommendation creating process while decisions are "made" thanks to the algorithm and sub-sequently forwarded to employees of the investment company for further works. The Statement should serve as means for uniform implementation of robo-advisory by interested entities, as well as ensuring proper protection of investors (especially non-professional ones). It discusses topics such as designing and creating relevant algorithms, the scope of competences of human advisors having knowledge and any experience in robo-advisory, outsourcing, ensuring contact with human advisors where necessary, the importance of compliance systems with respect to robo-advisory.
KNF was one of the first financial authorities in Europe to issue such document and hopefully this step will initiate further developments in the area of broadly understood "legaltech" in Poland. Currently the Statement is still under discussion. Time will tell whether the Statement will have its continuation in the growth of the robo-advisory market in Poland.
Footnote
1 BusinessInsider
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