FRANCE Law and Practice Contributed by: Hubert de Vauplane and Hugo Bordet, Morgan Lewis & Bockius LLP
mention them, while remaining sufficiently broad to cover this type of practice.
Generally speaking, robo-advisers allow cus - tomers to invest in a diversified portfolio of list - ed assets, such as a mix of bonds and stocks. Robo-advisers rely heavily on investments in exchange-traded funds or mutual funds. The appearance of crypto-asset markets on the financial landscape raises specific challenges for the business models of robo-advisers. The implementation of robo-advisers by finan - cial actors can trigger licensing requirements, depending on the level of automation and the client’s involvement in managing these assets. For instance, when the client does not intervene in the management of their assets, the service provided by the robo-adviser may be classi - fied as portfolio management for crypto-assets, which would require a CASP licence. However, if the service is “semi-automated” , the robo-adviser’s offering might be excluded from the scope of portfolio management for crypto- assets. Nevertheless, depending on the circum - stances, it could still fall under other categories, such as “reception and transmission of orders for crypto-assets on behalf of clients” , “provi- sion of advice on crypto-assets” or “exchange of crypto-assets” . 3.2 Legacy Players’ Implementation of Solutions Introduced by Robo-Advisers Until now, the services provided by robo-advis - ers were reserved for clients with sufficient finan - cial capacity to ensure the profitability of the service. Solutions introduced by robo-advisers target two key issues for mainstream clients: firstly, the service’s cost, and secondly, the entry fees. Various studies have recently outlined that reduced costs and low entry fees are at the heart of robo-advisory strategy. Therefore, the main response of legacy players would be to offer
3. Robo-Advisers 3.1 Requirement for Different Business Models Three trends can be found in the French market regarding robo-advisers: • robo-advisers helping mainstream clients in their investment decisions; • robo-advisers managing investments directly on behalf of their clients; and • robo-advisers acting as insurance brokers. In such cases, the services provided by robo- advisers qualify as investment advice or portfolio management within the meaning of the MiFID II framework, and the robo-adviser must conse - quently be licensed as either a financial invest - ment adviser or an ISP. Robo-advisers that are active in the insurance market have to register as intermediaries with the French register of bank - ing, finance and insurance intermediaries (Orias). However, in contrast to legacy players, most of the processes of robo-advisers are wholly auto - mated. The clients provide information relating to their financial capacity, objectives and risk aversion through standardised questionnaires. Depending on the client’s profile, the robo-advis - ers provide advice relating to investment oppor - tunities or manage investments on the client’s behalf. The AMF reiterated in 2017 that entities offering automated tools which provide clients with estimates of how financial instruments will perform are subject to the duty to deliver clear, accurate and non-misleading information.
260 CHAMBERS.COM
Powered by FlippingBook