Asic said it had spoken to a number of digital advice providers and decided that the nascent industry would benefit from additional official guidance specific to robo-advice.
It said the provision of digital advice raises some unique policy issues. These included who should take responsibility within an organisation for the provision of robo-advice, and what steps a financial adviser should take to monitor and test the algorithms underpinning digital advice.
Asic proposes to introduce a requirement that there is at least one properly qualified financial adviser in each licensed digital advice operation.
It plans to give digital advice businesses a six-month transition period to meet this requirement once it publishes the new guidelines.
Digital checks
On the quality of the algorithms behind the financial product advice, Asic noted the problem is that if there is a problem or an error a large number of clients could end up receiving poor quality financial advice.
“To ensure that good quality advice is provided to clients, digital advice licensees offering digital advice services must ensure that the algorithms underpinning the digital advice are properly designed, monitored and tested,” it said.
“Our draft regulatory guide outlines the ways in which we think digital advice licensees should monitor and test the algorithms underpinning the digital advice being provided.”
Asic is proposing to require that digital advice licensees have appropriate systems in place that clearly set out the purpose, scope and design of their algorithms, keep records of their testing strategy, including all their results, and have appropriate processes for managing any changes to an algorithm.
“Asic is committed to helping industry take advantage of the opportunities offered by robo-advice while ensuring that investor and financial consumer trust and confidence is not compromised,” Price said.
