Test of Suitability Instead of Protocols

The current discussions, in our opinion, misjudge the opportunities which accompany the Amendment.

As background: the draft bill for the implementation of MiFID 2 was for many a surprise, because now, instead of complex protocols, there should be declarations of suitability for the customer. “No Consultation Protocols” was the way the headlines of on-line media had it at first. The next day it became clear to many that it will not be so simple. Now what’s taking the place of the protocol are demanding tests of the suitability of individual products and the preparation of a declaration explaining in what way the products are suitable. Of the Federal Financial Supervisory Authority (BaFIN), in some publications, it was said that this was by no means something easier, because higher standards would now be applied to the test of suitability. In our opinion, this was to be expected.

So far, the opportunities of the current initiative are misunderstood. Dispensing with the protocol will change the process of investment advice decisively and will reveal considerable potential.

For years now there have been excellent banks which, in the course of their advisory processes, rely on systems like that which compliance intends. The essential component of these systems is the assessment of the suitability of products. By dispensing with the preparation of a protocol, consultants can now concentrate on systematically recording the goals and vision of the customer. On the basis of soft and hard data and the requirements of the customer, an optimally structured algorithm can carry out all tests of suitability. Through the articulation of individual decisions this can produce a simple and understandable declaration of suitability. The elaborate documentation of the course of a consultation as well as the detailed free text explanation can remain undone. This can save not only time in the consulting session. Those responsible for the ex post control through compliance can also be drastically downsized, which leads to a considerable reduction in unit costs of investment advice.

And with that we come to Opportunity No. 1:

Investment advice can once again be worthwhile for smaller sums when the bank uses the regulatory opportunity through digitalization. For that one needs a cleverly structured and integrated system for the testing and declaration of suitability. aixigo can make the demonstration of feasibility at any time.

And now to Opportunity No. 2:

Let’s look at the current offers of do-it-yourself advice from FinTech and financial service providers. These are oriented toward “nonconsulting”. Why? Because one shied away from barriers to consulting, that is to say, barriers to documentation. We maintain that there is no longer any excuse for “consulting fear”. Genuine investment advice will now be possible and is now required, since many of the concepts moved barely on the edge of consulting, in our opinion. For the positioning of a “Robo Advisor”, consulting will be a crucial distinguishing feature.

Mario Alves

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