Fri, Aug 11, 2017 - Page 12 News List

FSC green-lights fully automated advisory services

PIONEER:The commission said that O-Bank is the only domestic lender that offers such a service, provided to clients with a trust account and a consultation contract

By Ted Chen  /  Staff reporter

The Financial Supervisory Commission (FSC) yesterday gave the green light for securities investment trust and consulting (SITC) firms to provide robo-advisory services that automatically execute market orders according to conditions specified by clients.

The change, which goes into effect today, allows the automated services to make trades on behalf of clients without gaining approval for each transaction.

Previously, such services could only provide investment recommendations based on clients’ risk profiles and investment goals, while clients were required to place their own market orders or give their consent for each trade.

“Automated trades will execute when a client’s investment portfolio deviates from the terms specified in their contract with SITC firms,” Securities and Futures Bureau Deputy Director-General Chou Hui-mei (周惠美) said at a news conference in Taipei.

Automated trades, including stop-loss orders and trades to rebalance a portfolio’s allocation of bonds and stocks, would enable robo-advisory services to help investors react to market developments, she said.

Due to the expanded scope of such automated services, the commission has created guidelines for SITC firms, such as more stringent “know your customer” checks, improved investment product descriptions and questionnaires that more accurately reflect clients’ risk profiles and needs, she added.

SITC firms would also be required to establish committees to oversee continuous improvements to the algorithms underpinning the services, as well as conduct routine checks on their performance in terms of returns, Chou said.

Technology start-ups would be required to gain SITC designation before being allowed to offer robo-advisory services, she added.

O-Bank (王道商業銀行) is the first domestic lender to have launched a service that meets the commission’s definition of a robo-advisory service, the FSC said.

The digitally focused lender provides an automated service to clients who have opened a trust account and signed a consultation contract, it added.

While CTBC Bank Co (中國信託銀行) has a similar service, it requires clients to sign a discretionary investment management contract, with investment advice being provided by an investment manager, as well as the company’s algorithm, the commission said.

Taipei Fubon Commercial Bank (台北富邦銀行) has announced that it plans to launch a robo-advisory service before the end of this year.

Fubon Bank has invested about NT$474 million (US$15.64 million) in Nutmeg Saving and Investment Ltd, Britain’s largest robo-advisory provider with a discretionary investment management business model.

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