The Central Bank of Bahrain has today issued the Directives on “Digital Financial Advice”, better known as robo-advisors to most. This was issued following an industry consultation process.
Mr. Khalid Hamad, Executive Director of Banking Supervision,Central Bank of Bahrain said,
“The new rules will enable specialized Fintech firms planning to offer digital financial advice obtain a license to offer such services to investors. In addition, banks and investment firms will now be able to introduce such services with approvals from the CBB. The new rules focus on providing safeguards and controls governing the use of algorithms or AI which are embedded in the software programs used in the digital advisory tools.”
For the Bahraini financial services sector, this is yet another important step towards digitalization by harnessing the power of intelligent automation of ‘financial advice’ by the use of algorithms in automated tools that use the logic, approach and methodology applied by traditional financial advisors.
Robo advisors around the world has proven useful to democratise access to financial investments and also to serve as a useful tool for wealth managers.
Robo advisors are increasingly become a popular vertical within fintech especially in countries like the United States with companies like Betterment hitting over US$ 1 Billion valuation and becoming the first fintech unicorn from this category.
The AUM size of robo-advisors are also starting become respectable with some firms managing over $US 100 Billion in funds.
According to the central bank, the rules shall be available on the CBB website in due course.
Featured image credit: CBB