FSC lifts ban on 'robo advisor' services for securities trading

2017/08/10 22:56:50 fontsize-small fontsize-default fontsize-big
CNA file photo

CNA file photo

Taipei, Aug. 10 (CNA) The Financial Supervisory Commission (FSC), the top financial supervisory body in Taiwan, said Thursday that it has lifted a ban on "robo advisor" services for securities trading, a move expected to facilitate financial technology development in the country.

According to the FSC, digital robo advisor services are implemented based on mathematical rules called algorithms, which are executed by software so that financial consulting does not require a human advisor.

Robo advisor securities services are able to allow financial firms, including securities houses or banks, to provide clients with automated investment consulting, which can adjust clients' investment portfolios without the need to confer with a human advisor on the basis of pre-agreed conditions between firms and their clients, when investment returns drift away from the original focus over time.

For instance, an investment contract originally written between a financial firm and its client might have equity assets account for 20 percent and bond assets 80 percent of the value of a portfolio, but in a changing market equities might represent 40 percent of the value of total assets, up from the original 20 percent, with the value of bond assets falling to 60 percent.

In such a situation, the automated investment advisor mechanism adjusts portfolios so they return to the original investment goal by cutting equities to 20 percent and boosting bonds to 80 percent of value with no need for a human advisor, according to the FSC.

Chou Hui-mei (周惠美), deputy head of the FSC's Securities and Futures Bureau, said the robo advisory service will respond to losses or profits and adjust clients' investment portfolios automatically to reflect the original goals.

Before adopting automatic investment advisory services, Chou said, financial firms and their clients should reach agreement in advance.

According to the FSC, the new mechanism will be initially applied to mutual funds, but based on the experience of the U.S. market, could be extended to exchange traded funds ETFs and other financial products over the longer term. Currently, O-Bank (王道銀行), a commercial bank in Taiwan, provides clients with a similar choice through a digital advisory service, but any adjustment to investment portfolios must still be executed by a human advisor.

With the robo advisor mechanism in place, O-Bank is able to make its digital services more efficient.

The FSC said that several other financial firms such as Tarobo Investment Advisors (大拇哥投顧) have secured the commission's approval to start robo advisor services.

(By Tsai Yi-chu and Frances Huang)
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