The Financial Markets Authority (FMA) is seeking feedback on its proposals that would enable entities to provide robo-advice.
The measure would be temporary before new legislation is passed by Parliament, as proposed changes to financial adviser laws are designed to address this issue, but will not come into effect until 2019.
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".
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.”
FMA director of regulation, Liam Mason says, “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 is gaining traction around the world and the FMA has been approached by New Zealand companies on the introduction of the digital tools locally.
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.
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.