Financial advisory and broking services including robo advisory and auto-trading
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.
Attitude of the country towards modern financial advisory and broking services
Automated financial portfolio management and robo-advice are one of the fastest-growing fields in portfolio management. The asset management industry is primarily driven by technology and is shaped by trends in cloud computing, the Internet of Things, advanced analytics, as well as artificial intelligence. Examples of robo-advisory companies operating in Czechia include Portu, Fondee and Indigo – lately, all of these have been growing in terms of the number of users as well as the value of managed assets as Czechs seek new opportunities how to invest their money.
Obligations and requirements to provide financial advisory and broking services, or ancillary services described above
As is the case with standard asset and portfolio management services, regulation in the area of investment services applies to bank and non-bank securities brokers (including non-EEA branches), investment intermediaries and tied agents of securities brokers and investment intermediaries.
A securities trader's license is required for the provision of investment services, i.e. the receipt and transmission of orders relating to investment instruments, the execution of orders relating to investment instruments on behalf of a client, trading in investment instruments on own account, the management of client assets, investment advisory services, the operation of a multilateral or organised trading facility and other services listed in the Act on Capital Market Business or European regulations.
A license is required for asset managers associated with investment instruments (asset or wealth management). There are several categories of securities broker (“OCP”) licenses and the complexity of the licensing process at the CNB depends on these categories: (i) OCP with full license and the ability to receive customer assets (initial capital EUR 730.000), (ii) OCP with the limited license and the ability to receive the deposit. (iii) an OCP with license without the possibility to receive customer assets (initial capital EUR 50,000), the execution of this version of the OCP being relatively the least complex in practice.
The costs of a licensing procedure include the administrative fee (up to CZK 200,000, i.e. approx. EUR 8,000) and additional legal and other associated costs of up to dozens of thousands of euros, depending on the license type and on which and how many types of investment services the license is supposed to cover.
Funds and investment instruments entrusted by the customer to the company are, in accordance with the Act on Capital Market Business (256/2004 Coll.) subject to the guaranteed system provided by the Guarantee Fund. The Guarantee Fund shall provide compensation in the amount and under the conditions set out in the Act on Capital Market Business, but not exceeding the amount corresponding to EUR 20.000.
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
Many Czech regulatory requirements are based on EU law or are influenced by EU-wide developments. However, entities that wish to operate in the Czech market should especially focus on the legal qualification of instruments covered by their services and assess whether they do or do not qualify as investment instruments under the relevant legislation.
Also, anti-money laundering and data protection regulations are to be complied with.
Market size for financial advisory and broking services as well as adjacent services and biggest companies in this business area
Unfortunately, there is no statistical data covering specifically the market/sector of financial advisory and adjacent services. However, investment platforms such as Portu or Fondee have reported in the recent past a month–on–month growth of the customer base by 10 % and even more.
Additional comments regarding the economic situation for financial advisory and broking services as well as adjacent services or what FinTech’s must be aware of in this business area