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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.

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“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.


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