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
Despite the fact that robo-advisory services in Poland are at a very early stage of development, they are beginning to gain attention of supervisory authorities. The Polish Financial Supervision Authority (Komisja Nadzoru Finansowego) issued a statement pointing to a number of risks associated with offering such services.
Also, the market recognizes and distinguishes this area of financial innovation – the investing robot Investo, offered by ING bank, won the ranking "Banking Innovation of the Year 2021" by Forbes magazine.
Obligations and requirements to provide financial advisory and broking services, or ancillary services described above
In Poland, specific regulations on artificial intelligence have not yet been developed. A source of information on the legal environment of robo-advice and self-advice are recommendations and published positions of the supervisory authority - the Financial Supervision Commission (Komisja Nadzoru Finansowego; “KNF”).
Investment advisory services consisting of preparing recommendations based on the client's needs and situation constitute brokerage activities regulated by the provisions of the Act on Trading in Financial Instruments (Ustawa o obrocie instrumentami finansowymi). However, not every example of using algorithms to generate recommendations will be treated as meeting the requirements of investment advisory services. The key thing in this case is to take into account the individual situation of the client in the recommendation. The provision of adjacent services that are general rather than individual in nature is, in principle, not regulated and does not require authorization.
Brokerage activities may be conducted on the basis of a permit granted by the Financial Supervision Authority. The legal basis for granting authorisations and rules of conducting brokerage activity is the Act on Trading in Financial Instruments. Brokerage activities may be conducted by investments firms, which are for example brokerage houses. The amount of the fee for brokerage activity permits depends on the scope (types) of brokerage activity for which the permit is granted. The maximum amount of fees charged may not exceed EUR 4,500. The initial capital of a brokerage house for conducting brokerage activity is, as a rule, at least EUR 125,000.
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
National regulations do not distinguish between "traditional" and technology-enabled advisory. These regulations are "technology neutral". The investment firm is responsible to the client for the performance of the service. This means that it cannot exempt itself from liability to the client by indicating that it used technical solutions provided by another entity in the process of providing the service. Liability of an investment firm for damages caused to clients as a result of non-performance or improper performance of an outsourcing agreement (i.e. an agreement under which the investment firm has entrusted the execution of operations related to the activities conducted by the investment firm to a foreign entrepreneur or trader), by the entrepreneur or foreign trader, cannot be excluded or limited.
Market size for financial advisory and broking services as well as adjacent services and biggest companies in this business area
Although the statistics for Poland on the size of the robo-advisory market – along with the forecast to 2023 – show dynamic growth, the growth rate is decreasing. The number of robo-advisory users is close to 30,000 in 2020, with a penetration rate of 0.08 per cent. Assets under management in the robo-advisory segment amount to $184 million in Poland in 2020. The number of users in the robo-advisory segment is expected to reach 67,900 by 2023.
Besides Investo, it is worth mentioning the robo-advisory service offered in Poland by the Slovak brokerage house Finax and ETFmatic, which was acquired by AionBank in 2021.
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