Chances and Risks of Online Consulting and Information

Does the digitally positioned customer, the Internet-savvy client or patient know everything better then? And is avarice really going to be digital because the simple, easy to understand product on the product side is largely digital and cheap?

Many financial services provided by banks, savings banks, insurance companies or funds are, from an economic point of view, trusted goods whose decisive benefit – if at all assessable or arriving – can often only be expected after years or decades. It is typical for such products that there is often a clear (temporal) divergence between performance and consideration, so the (non-) realization of the performance promise often lies in the distant future. This strongly emphasizes the importance of understandable, reliable and comparative advice and information, including an indication of risks or losses, availability, performance less any costs in plain text and euros, and an unequivocal statement of eligibility for one Needs situation as well as significant influences on other (existing) products. This will enable customers to self-manage and critically deal with financial products and, in particular, to assess how much risk (in relation to other products) has already been taken (“sustainability”), based on the specific target and the initial situation of a consumer, because they are now able to perceive and assess the information.

Due to the complexity of the information and decision-making situations, consumers usually have a high need for information both with regard to the analysis of their own economic and financial situation today and in the future as well as with regard to potential problem solutions. The majority, due to their high need for information as well as the low level of protection provided by assets, should be particularly dependent on high-quality exploration, education and recommendation. High-quality means in this context primarily to obtain information that is needed in view of the available knowledge and experience (skills) and the individual needs situation. In practice, counseling situations are regularly characterized, among other things, by information and decision overloading of the customer
(information overload, choice overload).

An essential advantage of Digital Advice is, in principle, to provide the necessary information for self- exploration and self-education on the appropriate access channel (Internet, apps, social media) in a solution- and target-group-oriented manner. Both advisory elements thus replace, at least in part, the “how” (know your customer) and possibly also the “what” (know your product) of stationary analogue
embossing. In addition, the analog consulting world has long been digitized, from the collection of personal data in the desktop or notebook of the consultant on the electronic mediation of product
information to the standardized recommendation according to the algorithms used. The progressive digitization and its entanglement with analogous processes also allows non-banks or innovative start-
ups, the so-called FinTechs, to locate their core business fields in the value chain of financial consulting.

Basically, seven types of digital counseling systems can be identified as business models (B2C):

• Fully Automated Asset Management: Leverage simple tools that require only a simplified and standardized user experience, including simplified investment rules and investment recommendations based on previously determined simple investor profiles and risk tolerances (generally fee or commission-based, financial planning and asset allocation).

• Adviser-assisted asset management: Fully automated variant with assistive use of a (virtual) advisor (telephone, e-mail) that shows simple steps in financial planning as well as regular suggestions for the design and revision of the portfolio (in principle, fee- or commission-based possible; and asset

• Social trading: Internet platforms where (potential) users can mirror the investments of purportedly successful investors in a different defined investor and role model community for their own portfolio.

• Cross-product and product-specific comparison portals, often in conjunction with simplified investment rules and investment recommendations based on simple investor profiles and risk tolerances that can be determined beforehand (generally fee-based or commission-based).

• Simple and inexpensive transaction processing with transparent pricing (usually included with the former types, often already part of the traditional online banking of direct banks or of inpatient banks
and savings banks with Internet banking, not discussed here, as hardly innovative)

• Comprehensive account management: aggregation and merging of all relevant financial accounts or contracts (investments, insurances, loans), usually in connection with the first two systems (account aggregation, not discussed further here, as in the two the former types are often included).

• Internet-based credit and venture finance (crowdfunding): Users can lend or receive (crowd aloud), often micro-loans, on an online platform in a specific environment (eg auxmoney) and participate in
projects, often in micro format (crowdinvesting). , partly with high capital character (for example, seedmatch, kickstarter, not discussed here in general, as there is generally no direct connection to the
elements of advice such as exploration, education or recommendation).

The boundaries between inpatient counseling systems and variants of the Digital Advice have long become blurred. This can be attributed to the manageable variants of access as well as to the limited process elements (exploration, information, recommendation). Currently, the information components (exploration, intelligence), transaction subsidy and acceleration, and account management aspects seem
to dominate. From the point of view of citizens as information and advisory seekers, the interlinking of digitized offerings with the receipt of stationary elements could prove to be advantageous if it seems attractive to achieve multiple uses with just a few instruments, an omni-channel flexibility.

The forms and business models of the digital financial advice show that even with at least partially self- exploration and / or self-education often follows a certain kind of recommendation, which – albeit partially rudimentary and standardized – in the cut to the customer’s or active passively specified data to suit its situation, goals and causes. In this respect, the legal framework should in principle be applicable to digital financial advice, albeit in a systematic, structured, standardized and comparable way, not in today’s fragmented and over-regulated way – alike for digital and analogue forms.

Consumers may voluntarily or unintentionally, and often unconsciously, create personal information that third parties, such as the owners of the business models of the supplying industries or decision- makers of state institutions, can and want to exploit. These personal data often have an institutional, social, and / or economic value that all actors, in principle also consumers, should be able to use individually or collectively as a subject of negotiation. It seems to be decisive from the perspective of the citizens, how easy, comprehensible and clearly recognizable, that the used offers are paid with the personal data (also by passing on to third parties) and if there are rejection possibilities of avoidance as well as solution alternatives gives.

This includes the simple, clear and comprehensible identification of
the extent to which personal data for direct or indirect personal, geographic and technology-dependent (for example, depending on the access / device used) price differentiation (should) be used. Similarly,
this concerns the labeling in terms of (IT) security, including the declaration of the expected and compulsory participation of the information and advice seekers. Up to a desirable regulatory solution, a transitional solution is basically conceivable. If one follows the
information discussed on the acceptance assessment, then an at least initial willingness to pay for high standards in terms of security and data protection could also be taken into account through a special

Considerable here would be a seal of quality, which simply and understandably documented that a provider of digital financial advice (exploration, education or recommendation) in terms of security and reliability and related to the protection of personal data more than meets the statutory minimum requirements. In order for such a seal to be capable of building market confidence at all, the
requirements discussed in Digital Payment Services would have to be met.

The financial sector can be regarded as prototypical for the progressive digitization of the business models of service providers whose products directly or existentially affect or directly affect the basic and additional financial requirements of most citizens. With a time lag these developments can be traced in the trade and more recently also in the area of health and mobility, with well comparable (potential) structural changes.