The Monetary Authority of Singapore has proffered its take on the imminent explosion of digital advisory – or ‘robo’ – wealth management services and has asked the public to weigh in on the robo surge.
A recently released consultation paper by the Monetary Authority of Singapore (MAS) has provided a set of guidelines for existing digital advisory service providers and has requested public opinions to guide the further expansion of robo services within Singapore.
MAS clarified the distinction between conventional financial advisory services and insurgent ‘robo’ advisory offerings, which “[rely] on the use of algorithms and online tools to analyse client data and recommend investment portfolios”.
According to MAS, financial institutions currently regulated under the Securities and Futures Act (SFA) and the Financial Advisers Act (FAA) are already free to provide digital advisory services; however, owing to a surge of “new interest from firms intending to offer these services to retail investors”, the Singapore regulator wants “to make it easier to operate in Singapore… by “[refining] the licensing and business conduct requirements.”
MAS predicts the influx of robo advisers, particularly from start-ups outside the traditional wealth management sector, “will widen investor choice to low-cost investment advice” – something it appears keen to encourage.
A loosening of the rules for organisations that qualify under SFA regulations will allow certified newcomers to offer their services to retail investors regardless of whether they fail “to meet the track record requirement,” the consultation paper said.
However, these organisations are still obligated to meet certain safeguards, including a provision to “[offer] diversified portfolios of non-complex assets”, and a promise to “[undertake] an independent audit of the digital advisory business within one year of operations.”
While MAS said it “[recognised] the unique characteristics of digital platforms,” it was nevertheless conscious of the cybersecurity risks posed by these digital platforms, setting out guidelines to mitigate these threats.
“As digital advisory tools may be susceptible to technology risks such as erroneous algorithms and cyber threats, MAS has set out expectations on the governance and management oversight to be adopted by digital advisers, including the need to put in place a robust framework governing the design, monitoring and testing of algorithms,” the paper said.
The public can access the consultation paper on the MAS website. The consultation period will end 7 July, 2017.