by Susan Edmunds
The Financial Markets Authority (FMA) has revealed the submissions its received on its proposal to offer a class exemption for roboadvice providers. The move is designed to allow roboadvice to be offered in this country ahead of the introduction of new financial advice laws that clear the way.
Director of regulation Liam Mason said it was working through drafting an exemption notice, and developing an application process for those who wanted to apply for the exemption. The FMA would consult in November on the exemption itself. It will start taking applications from those wanting to offer roboadvice early next year.
It plans to expand the roboadvice exemption beyond investments to include mortgage and insurance products, too. The FMA will not proceed with proposed financial limits on products that can be offered via roboadvice.
Mason said the FMA had been pleased with the response it received. “It was a very large number of submissions.”
Many said they planned to make use of the roboadvice exemption once it was offered. BNZ said it would be keen to offer roboadvice “as soon as we are able to”. Fisher Funds said it wanted to use robo to open an additional channel to engage clients.
“We are currently in the planning stages and would expect to launch a personalised roboadvice service by mid to late 2018. The advice provided would be centred on KiwiSaver and managed funds clients.”
Mercer also had plans for KiwiSaver roboadvice. Southern Cross said it would, too, if health insurance was included in the proposed eligible products. ANZ and Kiwi Wealth’s answer to that question were redacted.
Mason said the FMA had been concerned that digital advice was the sort of thing that would help those who were not otherwise getting enough information about their financial decisions. New Zealand needed to keep up with advances in the rest of the world.
The FMA had originally proposed that the class exemption should be offered to any provider that told it that it had met the standards required. But submissions had indicated that market participants thought that unfair, and that roboadvice providers should be held to the same standard as AFAs,
That means potential roboadvice providers will instead have to apply to the FMA and have their systems and processes scrutinised, including good character declarations, providing information showing they are competent to provide the service. “This is consistent with the requirement for AFAs to apply to us before they can enter the advice market.”
Mason said the overseas experience indicated that roboadvice would be used by people who were not otherwise getting financial advice, not by those who would have otherwise been clients of human advisers.
Submitters who opposed the exemption raised concerns that roboadvice has risks and we should not rush to enable it. Some submitters also felt roboadvice should be implemented through a law reform process and not through the use of our exemption powers.
“Our view is that an exemption has the potential to improve consumer access to advice in a cost-effective and innovative manner,” the FMA said.
“The exemption will have conditions in place to help address the risks and provide consumer protection safeguards.”
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