Green light given for robo-advice
Green light given for robo-advice
24 October 2017
The Financial Markets Authority (FMA) has given the green light to fast-tracking regulation that will make so-called “robo-advice” legal in New Zealand.
Robo-advice,
also known as automated advice or online financial advice,
is effectively an automated, online financial adviser that
helps people invest their money or make other financial
decisions.
Under current regulations, personalised
financial advice must be provided by an Authorised Financial
Adviser who must be a “natural person,” effectively
prohibiting the use of online financial platforms which give
advice not clearly attributed to a person.
However,
in looking at global trends, the FMA has recognised that
such online financial advice platforms could improve the
wider public’s access to personalised advice services, and
could help to address an advice gap they have previously
identified in New Zealand.
An FMA-led consultation
process found strong support for robo-advice, giving it a
mandate to grant exemptions and allow for fast-tracked
robo-advice.
Companies wishing to provide such
services must apply for an exemption and will be monitored
by the FMA. They must also be able to meet competence,
capability, and good character requirements.
Rachel
Strevens, Founder & CEO of online financial and investment
platform Ilumony, says that this is a huge step forward for
New Zealand.
“We’ve been providing a basic level of online financial advice for the last six months, and the feedback from customers has been great. However, we’ve been significantly restricted in what we can do due to the regulation that exists in New Zealand, which has acted as a bit of a handbrake.
“This decision will allow us to
go into a lot more detail with our customers, and provide
them with much more valuable and beneficial personalised
advice via our online platform.
“In some areas, New
Zealand is rather advanced when it comes to financial market
technology & innovation, however this is one area where we
have been left lagging.”
Strevens, an Authorised
Financial Advisor, says robo-advice platforms offer many
benefits to everyday New Zealanders because their low
operating cost model allows for a much wider audience to
access financial advice.
Robo-advice platforms
globally have proven popular with millennials and investors
with smaller amounts of money to invest who would generally
not have access to other financial advice channels.
In New Zealand, the FMA believes robo-advice could be of
particular help to KiwiSaver investors who collectively have
investment assets of more than $40b. Less than 0.3% of all
new KiwiSaver accounts or transfers receive personalised
financial advice.
New Zealand now has a little bit of
catching up when it comes to online robo-advice
platforms.
“There are many countries that have been
allowing this kind of robo-advice for years, however our
regulation has held us back, so it’s great to have this
positive step forward from the FMA. We’ve been expecting
and preparing for this decision so we’re perfectly
positioned to make the most of these rule changes for our
customers.”
Since launching earlier this year,
Ilumony has helped advise Kiwis on more than $8.5 million in
financial investments.
ENDS