Robo-advice has been increasingly adopted; FMA seeks feedback on robo-advice exemption
The Financial Market Authority (FMA) of New Zealand has released today an announcement to get feedback on robo-advice exemption.
According the announcement issued, the FMA is seeking feedback on its proposals to allow entities to provide personalised financial advice generated by a computer programme or algorithm (robo-advice). This would be a temporary measure before new legislation is passed by Parliament.
The current law, passed in 2008, did not contemplate digital advice, meaning that personalised advice, or advice that takes into account an individual’s financial situation or goals, can only be given by “a natural person”. Proposed changes to financial adviser laws are designed to address this issue, but will not come into effect until 2019.
The FMA is proposing to use its exemption powers to facilitate robo-advice prior to the legislative changes. The purposes of the Financial Advisers Act (‘FA Act’) are aligned with the Financial Markets Conduct Act, which include “promoting innovation and flexibility in financial markets.”
Liam Mason, FMA Director of Regulation, said: “we’ve been looking at ways to enable innovation to help tackle the advice gap in New Zealand, but also to mitigate the risk of poor consumer outcomes. We are seeking to ensure we maintain the standards of consumer protection provided by the legislation while encouraging innovation that can help more people get help with investment decisions. Robo-advice offers a way to address the low numbers of consumers currently receiving personalised financial advice[i].”
Robo-advice has been increasingly adopted around the world and New Zealand companies have approached the FMA to discuss introducing digital financial advice tools here. The FMA’s proposals would allow personalised robo-advice, subject to limitations and conditions to safeguard consumers. Class robo-advice, or generic recommendations based on characteristics such as age and risk profile, can already be provided.
Some of the key limits and controls that would apply to the exemption (see consultation paper for the full list):
The limits and conditions of the proposed class exemption, together with other existing legislative requirements, are intended to ensure that personalised robo-advice would facilitate technological innovation while protecting consumers.
The exemption proposed for personalised robo-advice would be effective under the current FA Act. The requirements that apply under the exemption may be different from those that will apply once the law reform takes effect.
The consultation on robo-advice exemption can be found here.
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