Although the investment management industry has been relatively slow to adopt new technology, it is catching up fast. While this is positive for many firms, it also brings challenges. Introducing new processes and distribution channels always takes time to bed down and much of the technology is at an experimental stage. This has not gone unnoticed by regulators, which are looking at developments and starting to conduct research, reviews and consultations.
In particular, as robo, or automated, advice enters the mainstream within the retail and wealth segments in developed markets, regulators are considering whether they need to extend or clarify the regulatory perimeter to cover new digital distribution channels and, if so, how. Robo-advice is seen by advocates as a middle way between personal investment research and face-to-face advice, but there is concern that this could lead to small investors being offered less effective advice than wealthier investors. In particular, they are questioning whether they need to extend the regulatory perimeter to cover new digital distribution channels and, if so, how.
FinTech is becoming a major driver for innovation in the investment industry worldwide. Some regulators have seen this as an opportunity for businesses in their jurisdictions and have taken steps to promote the industry locally. Also, advocates of ‘blockchain’ say the technology could speed up inefficient back offices and save billions in the amount of collateral that is required by the global financial system.