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FinTechs belonging to this category offer advisory and broking services for investments usually via an internet platform.
Robo advisory services usually offer an investment proposition following a series of questions concerning the personal financial background and the risk-bearing capacity of the user. Sometimes the respective platform also enables the user to directly execute the proposed investment.
Auto-trading concerns all services which automatically trade on behalf of the customer according to his or her specifications.
Apart from that some FinTechs collect and offer merely or as an ancillary service market information or operate comparison portals to increase the transparency of the capital markets and to help the investor with his decision-making.
There are also FinTech-advertising-services which advertise various financial services or products.
Introduction
Attitude of the country towards modern financial advisory and broking services
The acceptance of automated consulting and broking services as well as robo advisory and auto-trading services is growing, although a high percentage of the people either still don’t know these services or don’t use them. People are also aware of the potential risk of fully automated portfolio management systems.
Legal affairs
Obligations and requirements to provide financial advisory and broking services, or ancillary services described above
Consulting, broking, robo advisory and auto-trading services are financial services activities in the form of investment advice, investment or contract broking or portfolio management governed by the Austrian Banking Act (Bankwesengesetz – "BWG") and Austrian Trade Act. In addition, the EU-wide Regulation (EU) 2019/2033 on the prudential requirements of investment firms from 27 November 2019 (Investment Firms Regulation – "IFR") as well as anti-money laundering, the Directive (EU) 2019/2034 on the prudential supervision of investment firms from 27 November 2019 (Investment Firms Directive – "IFD") and data protection regulations are to be complied with. Currently, there is no national accompanying legislation on IFD and IFR in Austria.
License costs depend on the specific business model.
Among other things, particularly sufficient initial capital consisting of Common Equity Tier 1 capital ("CET1") available in Austria is required to obtain a license. In case of investment advice, investment or contract broking or portfolio management, where the service providers, in providing financial services, are not authorised to obtain ownership or possession of funds or securities of customers and who do not trade in financial instruments for their own account, an amount equivalent to at least EUR 50,000.00 in CET1 is required.
When offering financial advisory and broking services, the service providers are to comply with requirements for the initial capital as well as with the funds requirements at all times. According to Art. 92 Regulation (EU) No. 575/2013 (Capital Requirements Regulation - "CRR"), these are: a CET1 capital ratio of 4.5%, a Tier 1 capital ratio of 6% and a total capital ratio of 8%. When calculating the capital ratios, the fixed overheads of the respective financial service providers have an important impact.
Additional comments regarding the legal situation for financial advisory and broking services, or adjacent services or what FinTech’s must be aware of in this business area
A license is not required, where consulting, broking, robo advisory and auto-trading services are organised in a way that they don’t meet the requirements for investment advice, investment or contract broking or portfolio management services.