Sbanken’s robo-advisor first to be authorised as a ‘financial (robo)advisor’ in Norway
This could be the start of a new robot uprising, at least in the financial services. The Norwegian financial services industry, facilitated by Finance Norway and the Norwegian Fund and Asset Management Association (VFF), has established an authorisation scheme for robo-advisors, which was officially opened in January 2021. Sbanken’s robo-advisor was the first to pass this exam, with several others in the process.
FinAut, which has been authorising financial advisors for a decade now, had decided to start certifying robo-advisors as well, to ensure “same quality standards in all channels”. The authorisation process was tested throughout 2020 with six pilot companies (including Sbanken), before it was officially rolled out. The certification is an exciting milestone for the Norwegian financial industry, said Siv Seglem, CEO of FinAut.
The authorisation scheme for robo-advisors examines the advice, as in personal recommendations, to consumers with their savings and insurance. The authorisation has four requirements. Firstly, the company must be a member of FinAut, which is a pre-qualification to ensure that it is trustworthy and has the right permits and licenses. Secondly, the robo-advisor must follow the Code of Good Practice, which are guidelines on consumer meetings and requirements set for subjects, regulations, ethics and communication. This must be documented through comprehensive checklists confirmed by the company and an external auditor. Thirdly, requirements are set for the approval process and that those involved in the robo-advisor itself are authorised. Finally, there are requirements for follow-up after authorisation and for re-authorisation in case of significant changes.
The possibilities within robot advice are almost limitless, said Magnus Selven, Head of Investment Advice at Sbanken. Terming the authorisation as a “seal of quality”, he added that it would reassure the consumers to know that “robo-advisors not only comply with strict regulations, but also include extended good practice and ethics in the advice process”.
Sbanken’s robo-advisor was built by Quantfolio AS, a Nordic fintech providing tech services to banks and financial services. In 2016, the Norwegian bank challenged the fintech to help build the world’s most sophisticated robo-advisor. Quantfolio AS helped Sbanken create a quantitative approach, where all the available funds were screened and the best one within each asset class was chosen based on users’ risk and preferences.
Jan Åge Skaathun, co-founder and CSO at Quantfolio AS, said that the Norwegian financial authorities have set a high standard for MiFID 2 compliance for advisors, which also applies for digital or robo advice, he told Asset News. Skaathun added that going forward, the bar must be set higher for robo-advisors. “It is no longer enough to have a digital journey that places consumers in, for example low, medium or high-risk portfolios, but rather uses data and algorithms to capture the investors individual preferences and provide actual individual advice,” he explained. In 2020, Quantfolio raised NOK 15m (€m) in a fundraising round, led by former Skagen founder, Åge Westbø and former manager Filip Weintraub, supplemented with investments from Stavanger based Venture fund, Link VC.