Project Innovate and it’s move to improve Financial Technology (fintech) across the industry has had a very positive reception across the UK. What project innovate initially set to achieve, was to tackle regulatory barriers to allow firms to innovate in the interest of consumers.
As part of Project Innovate, Financial Conduct Authority (FCA) launched the Advice Unit. The Advice Unit is a special support unit focusing on models that provide a ‘personal recommendation’ or ‘discretionary investment management’ for their clients and particularly on automated advice models, including fully or partly automated online advice.
To apply and receive regulatory feedback from the Advice Unit, firms need to demonstrate how their model meets Advice Unit eligibility criteria. In that regard FCA sets out a schema of negative and positive indicators.
Among the positive indicators, the Advice Unit strongly encourages firms to model their service around those consumers who do not have significant wealth or income. Their models should have the potential to deliver lower cost advice to unserved or underserved consumers. Moreover They will need to be able to demonstrate that they offer a genuine consumer benefit.
Additionally firms also need prove that their model is an automated advice proposition. FCA’s website for this matter states firms who wants to qualify for regulatory feedback, should have a system that the “core element(s) of the customer journey is automated. This may include some of the following: collecting fact find information, collecting underwriting information, conducting customer risk profiling, undertaking a suitability or appropriateness assessment, identifying suitable debt options, etc.”
Firms that meet the Advice Unit eligibility criteria are given regulatory feedback on their model. This could include:
- an initial meeting with the Advice Unit, and other specialist areas of the FCA if needed, to discuss the proposition
- for firms requesting ongoing engagement, a dedicated point of contact in the Advice Unit to provide regulatory input at agreed milestones
- specific feedback on the regulatory implications of the model – this could include follow-up meetings with relevant FCA staff to discuss specific issues, informal steers, and individual guidance as appropriate
- input on how to apply for authorization if the firm is currently unauthorized