Regulation Drives Financial Advice R-Evolution

Paolo Sironi, Maurizio Ravezzi

This chapter describes the evolution of financial advice after the deregulation of capital markets and in the aftermath of the global financial crisis (GFC). Regulation is the first engine of change because it forces advisers to act with clients inside a more transparent framework. The second level of MiFID is the backbone of the next generation of financial advice in European markets, and finds many symmetrical requirements in other international regulations operating beyond EU borders (eg, DOL fiduciary standards). Technology is the second engine, since it allows the delivery of financial services and products in more convenient ways and responds to behavioural changes stemming from the digitisation of people’s habits and consumption patterns. Robo-advisors seem to imply marginalisation of human advice, although it can remain vital to a hybrid model should it seize the opportunity to lead and build a more harmonious combination of regulation and innovation.

INTRODUCTION

The GFC brought to light the existence of profound imbalances in the delivery mechanisms of financial products and services to final clients. The crisis highlighted the many conflicts of interest that have