Exemption for personalised digital (robo) advice

Exemption for personalised digital (robo) advice better late than never

Following the FMA's release of its second consultation paper on personalised robo-advice (now called digital advice), the leading law firm has published its tips for providers looking to develop digital advice platforms.

Head of Russell McVeagh's Corporate Advisory group, Dan Jones, says the exemption is a necessary first step in putting the New Zealand financial advice regime on equal footing with overseas regimes, and may provide particular assistance to New Zealanders in KiwiSaver.

"A small number of providers have indicated readiness to launch digital advice solutions under the exemption, yet the timing and infrastructure costs could mean that enthusiasm is limited," he says.

In the firm's 'Digital advice exemption: better late than never' publication, key areas for providers to consider before relying on the exemption are highlighted which include: the commercial viability of digital advice, applying to the FMA to rely on the exemption, and considering the timing of the exemption in the context of wider law reforms. 

Senior Associate Joanna Khoo says, "The two main barriers for customers currently obtaining financial advice under the traditional human adviser model are the cost of financial advice and the minimum amount of investable assets typically required. Globally, the rise of digital advice has been a significant step toward reducing this advice gap by generating a low-cost solution suitable to a broad range of customers.

"While digital advice is already well developed in the US, UK, Australia, Singapore and Europe, New Zealand has been slow off the blocks. At about the time the Financial Advisers' Act 2008 (FAA) came into force here, firms in the US were already launching their first digital advice platforms," she says.

Digital advice may help KiwiSaver investors who collectively have investment assets of more than $40 billion. Currently, less than 0.3% of all new KiwiSaver accounts or transfers receive personalised financial advice. 

The FMA's paper further details conditions under which entities may provide personalised digital advice, and that were greenlighted earlier this year. The exemption will allow entities to provide personalised financial advice or investment planning services in respect of certain "eligible products" through a digital advice service, with no financial limits on the total investment amount of products that a digital advice service can advise on.

Notes to Editors:

Russell McVeagh's 'Digital advice exemption: better late than never' is available here.

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