The provision of digital advice services has been growing rapidly in Australia with a number of firms developing ‘robo-advice’ models without having a traditional financial adviser background.
The Australian Securities and Investments Commission (Asic) said it expects this growth to continue and wants to help support it.
Regulator support
“Asic is committed to encouraging innovation that may benefit consumers. Our guidance on regulating digital advice is a useful starting point for those providing or intending to provide digital advice in Australia,” deputy chairman of the regulator, Peter Kell, said.
Digital advice is the provision of automated financial product advice using algorithms and technology without the direct involvement of a human adviser. It can comprise general or personal advice, and range from advice that is narrow in scope (for example, advice about portfolio construction) to comprehensive financial product advice.
“In an environment where only around 20% of adult Australians seek personal advice, we think that digital advice has the potential to offer an attractive, convenient and low-cost advice service to retail clients who may not otherwise seek advice,” Kell said.
Licence requirements clarified
Asic’s new guide clarifies and gives examples of when a start-up or fintech company will need to apply for a proper financial advice licence, making clear the differences between providing information about a product and giving advice.
In Australia providing financial product advice is a financial service under the Corporations Act, and requires the provider to be licenced but defining when information becomes advice when using say an app has
The guide also includes information how an organisation in this area can meet all the licence requirements where its business model is different to that of a traditional financial adviser.
Asic details these in terms of the levels of financial, technological and human resources needed to provide the financial services covered by their licence; the supervisory arrangements necessary and the requirements to maintain adequate risk management systems; and the way digital licensees should monitor and test their algorithms.
The new ‘robo-advice’ guide follows a consultation with the industry which closed in May after receiving 38 submissions.
