In the aftermath of the 2007-09 global financial crisis, regulators in all major jurisdictions
introduced significant new requirements for financial firms. Certainly justified in purpose, these
regulations have increased market barriers, both directly through specific obligations, and
indirectly through the sheer magnitude and complexity they involve. Regulators primarily
focused on bolstering financial stability and consumer protection, while frequently disregarding
their objective of promoting financial innovation. Ten years after the crisis, we believe that it is
time to reconsider the appropriate balance between those objectives.
In this commentary, we show how EU financial regulation may stifle the innovation of financial
services. We use the example of automated investment advice, so-called ‘robo-advisors’, and
we show how a proper balance between regulatory objectives could be achieved through
establishing a ‘guided’ regulatory sandbox