FINTECH SURVEY REPORT April 2016 CFA Institute FinTech Survey Report 2 FINTECH SURVEY REPORT Contents About the Survey . 3 Respondent Profile . 3 Survey Results . 5 Familiarity with automated financial advice tools . 5 Sectors most affected by automated financial advice tools . 7 Investors affected by automated financial advice tools . 9 The effect of automated financial advice tools on consumers . 11 The extent to which automated financial advice tools will replace engagement with human advisors . 13 Biggest risk introduced from automated financial advice tools . 14 Greatest technological impact on financial services industry . 16 Impact of blockchain technology . 20 Crowdfunding/peer-to-peer lending marketplaces . 21 CFA Institute FinTech Survey Report 3 About the Survey Financial Technology (FinTech) is attracting increasing attention from consumers, investors, the investment management industry and regulators across the globe. Most recently, the Joint Committee of the European Supervisory Authorities (European Banking Authority, European Insurance and Occupational Pensions Authority, and European Securities and Markets Authority) requested comments on a Discussion Paper on the topic of automation in financial advice. The ambition of this consultation was to provide input into the debate on whether the three ESAs need to adopt measures, if any, in order to promote the safety and soundness of markets and convergence in regulatory practice. The Discussion Paper presented a preliminary assessment of the main characteristics of automated financial advice tools as well as their potential benefits, costs, and risks. In order to inform the policy debate, CFA Institute conducted the following global member survey using our Capital Markets opt-in survey panel. The survey was sent to members on the 5th of February 2016 and closed on the 19th of February 2016. 3,803 members were invited to participate in the survey and 775 valid responses were received for a response rate of 20% and a margin of error of ±3.2. Respondent Profile Of the 3,803 members surveyed, 92% of respondents are CFA charter holders. The breakdown of respondents charter age is shown in the following chart. The vast majority have had their charter for more than 2 years. The majority of respondents (56%) are from the Americas region (AMER), 27% from Europe, the Middle East and Africa (EMEA), and 17% from Asia-Pacific (APAC). Among all respondents, 16% are from the European Union (EU). 8%52%34%6%10 years No CharterCFA Institute FinTech Survey Report 4 56%27%17%AMER EMEA APAC84%16%Non-EU EUCFA Institute FinTech Survey Report 5 Survey Results Familiarity with automated financial advice tools 1. How familiar are you with automated financial advice tools (e.g. robo advisers)? - Very familiar - Somewhat familiar - Somewhat unfamiliar - Not at all familiar Our survey shows that 64% of respondents are familiar (very or somewhat) with automated financial advice tools, implying a fairly high level of awareness overall. Despite this, a not insignificant 16% of members are not at all familiar with such tools. 14%50%19%16%Familiarity with automated financial advice toolsVery familiar Somewhat familiar Somewhat unfamiliar Not at all familiarQuestion: How familiar are you with automated financial advice tools?CFA Institute FinTech Survey Report 6 The Americas region has the highest level of familiarity of all regions. Members in EMEA and APAC have similar levels of familiarity (but lower than AMER). Compared with respondents from EU, Non-EU respondents tend to show greater levels of familiarity. 18%57%14% 11%9%40%27% 25%9%42%26% 23%15%52%18% 15%9%41%25% 25%0%10%20%30%40%50%60%Very familiar Somewhat familiar Somewhat unfamiliar Not at all familiarFamiliarity with automated financial advice tools, by regionAMERICAS ASIA PACIFIC EMEA Non-EU EUQuestion: How familiar are you with automated financial advice tools?CFA Institute FinTech Survey Report 7 Sectors most affected by automated financial advice tools 2. Which sector do you think will be most affected by automated financial advice tools? - Banking - Insurance - Securities - Asset management - Other, please specify: text box - None of the above Unsurprisingly, asset management (54%) is considered to be the sector that will be most affected by automated financial advice tools, followed by banking (16%), securities (12%), and insurance (8%). Many of the open-ended responses put forward under “Other” noted financial advisors and wealth management as being the specific group that will be most affected. These findings are intuitive given the increasing proliferation of robo-advisers. 54%16%12%8%7%2%Sectors most affected by automated financial advice toolsAsset management Banking Securities Insurance Other None of the aboveQuestion: Which sector do you think will be most affected by automated financial advice tools?CFA Institute FinTech Survey Report 8 Respondents from the AMER region are more likely to consider asset management to be most affected by automated financial advice tools when compared with respondents from the EMEA and APAC regions. In EMEA there was a noticeable split between EU and non-EU members. EU members thought banking would be affected to a greater extent than non-EU members. However, overall both EU and non-EU members agreed that asset management will be most affected. 62%12% 12%5%8%2%45%16% 16%9% 12%1%44%26%11%15%3% 1%55%15% 13%8% 7%2%47%24%9%4%15%2%0%10%20%30%40%50%60%70%Asset management Banking Securities Insurance Other None of the aboveSectors most affected by automated financial advice tools, by regionsAMER APAC EMEA Non-EU EUQuestion: Which sector do you think will be most affected by automated financial advice tools?CFA Institute FinTech Survey Report 9 Investors affected by automated financial advice tools 3. How will the following investors be affected by automated financial advice tools? - Mass affluent - High net worth - Ultra-high net worth - Institutional - Other Positively affected Negatively affected Not affected No opinion Most financial advice tools offer relatively unsophisticated advice based typically on offering a diversified portfolio. It is likely because of this stylised fact that 70% of respondents think mass affluent investors will be positively affected by automated financial advice tools, followed by other investors (67%) and high net worth individuals (41%). The higher the wealth, the more likely that respondents do not think investors will be affected by automated financial advice tools, which are not yet capable of offering complex, tailored advice. 21%24%41%67%70%71%63%46%15%13%9%13%13%18%17%0% 20% 40% 60% 80% 100%Ultra High EarnersInstitutional InvestorsHNWOther InvestorsMass AffluentInvestors affected by automated financial advice tools*Positively affected Not affected Negatively affectedQuestion: How will the following investors be affected by automated financial advice tools?*Excludes no opinionCFA Institute FinTech Survey Report 10 Respondents from the APAC and EMEA regions are more likely to agree that HNW and institutional investors will be positively affected by the automated financial advice tools compared with respondents in the AMER region. -8-6-4-202468101214HNW Institutional InvestorsPercentage point difference when comparedwith averageSelected types of investors considered to be positively affected by automated financial advice toolsAMER APAC EMEAQuestion: How will the following investors be affected by automated financial advice tools?