We have gathered the most exciting news within the areas of digital financial advice and balance sheet risk.
Automated financial advice
A new automated financial advice app designed explicitly for the self-employed and freelancers is launching in the first quarter of 2019. Multiply is an entirely automated advice service, which is intended to provide holistic financial plans. However, initially, it would cover savings, life insurance, critical illness, income protection and legal services such as drafting wills. Link.
The research from the FCA suggests that presently the mortgage sales by fully automated providers amount to only 3-4% to the total sales volume. Moreover, according to the article by HSBC, 79% of customers do not trust the non-human mortgage advisers. At the same time, is believed that the technology has a potential to change the way that mortgage sector operates dramatically. Therefore, the hybrid services are expected to gain particular prominence in the coming years. Link.
According to the CEO of the FCA, Andrew Bailey, the British regulator is going to shift their focus from cost and charges aspects of MiFID II directive to implementing new rules around product governance and research within the scope of the same framework. Link.
The robotic financial adviser SigFig seizes opportunities by working with various types of clients – private customers, banks and financial advisors. The CEO of the American innovator claims that such a strategy enables the company to keep in touch with changing demands of consumers through working with them directly. At the same time, the bank does not miss out on leveraging the volumes of the advice through working with more prominent financial institutions, such as banks. Link.
The new requirements issued by the Swedish Pension Agency lead to 269 funds being de-registered from its Premium Pension System (PPM) platform. After a series of scandals, the Swedish regulator came up with the new rules governing the process of fund registration at the platform. Link.
Balance sheet risk
The Basel Committee on Banking Supervision has relaxed the required parameters for two crucial internal mode approach tests: the P&L attribution tests and the non-modellable risks. The P&L attribution test can now allocate the performance to the amber zone; a "buffer" aimed to prevent the trading desks from falling back into the SA too abruptly. Moreover, the criteria for classifying risks as modelable have been widened – as a consequence, a broader range of illiquid factors may be modellable by the banks. The new framework received mixed reviews from the industry. Link.
The Standardised Approach (SA) within FRTB is expected to leave those organisations opting for it at more disadvantage after the Basel Committee introduced changes to the FRTB framework. Following the recent review of the directive, the median capital requirement under the 2019 FRTB is projected to be 50% greater under the SA than the IMA, while under 2016 FRTB the SA capital requirements were estimated to be only 30% greater than under IMA approach. Link
The accounting profession is going to be threatened by the development of AI in the longer term, as the technology learns to recognise and process more complex patterns and algorithms. The professional judgement, which is commonly understood as the ability to interpret complex accounting standards and apply them to challenging real-life situations, will not save the profession as it exists presently. Link.
The accounting firms in the US begin to shift their offerings from traditional accounting services to digital products and financial processes automation. The tasks such as accounts payable processing, data entry, report generation and web data retrieval are being delegated to automated systems. Link.
Five trends are indicating the rise of cyber insurance: favourable regulatory environment, development of cyber insurance-linked securities market and cyber risk pools, growing awareness of silent cyber insurance, an emerging network of cyber MGA/MGU around the world, more engagement within the board of directors. Link.