Taiwan: Rules May be Relaxed for Investment with Robo-Advisors

Given the increasing willingness of securities investors to accept and utilize automated investment systems, Taiwan’s Financial Supervisory Commission recently indicated that it is considering relaxing regulations governing security investment consulting services with robo-advisors.

According to the statistics as of the end of November 2020, robo-advisors managed funds in amounts totaling NTD 2.29 billion, which is an increase of 123% compared to the end of 2019 (NTD 1.03 billion). Moreover, the number of investors using this service has increased 2.5 times compared with the same period in 2019.

As a result of this growth, more financial institutions are willing to invest in the development of this service. As of November 2020, thirteen financial institutions have offered automated portfolio advisory services, which number is up from 9 at the end of 2019 and 6 at the end of 2018.

Rebalancing operations are re-adjustments of asset allocations in a recommended investment portfolio to meet investors’ levels of risk tolerance. For example, an investor might allocate 60 percent of its assets to stocks and 40 percent to bonds. However, the asset allocation might change to 70 percent and 30 percent respectively, if stocks are rising.

Under the commission’s current regulations, robo-advisors must automatically dispose of some investment targets to retain the risk exposure that investors desire, while some securities and investment companies hope that the regulations can be relaxed so that robo-advisors can decide on the ideal allocation for investors. In this way, securities investors are more likely to generate a higher return on investment, as robo-advisors can utilize big data analysis and are not driven by emotion.

In summary, the commission believes that implementation of the new regulations will assist those financial institutions that have developed algorithms to execute rebalancing operations to provide retail investors with enhanced management and innovative services. Also, it is hoped that the contemplated relaxation of regulations will positively influence the securities exchange market.