FMA opens applications for personalised digital advice

Media release
MR No. 2018 – 02
22 February 2018

The FMA is now open for applications from providers seeking to offer personalised financial advice to consumers through digital tools and platforms (so-called robo-advice).  Digital advice is automated financial advice generated by computer program using algorithms which is usually delivered through a website or a software application.

Personalised financial advice uses information about a client’s particular financial situation or goals to make recommendations that meet a client’s needs.

Providers will operate under an exemption from the current Financial Advisers Act (2008). This law requires personalised financial advice to a retail client to be given by a human being. Reforms to this law are currently expected to come into force in 2019 and will permit digital advice. When these reforms are introduced, this exemption will be revoked.

Liam Mason, FMA Director of Regulation said, “The decision to allow providers to offer personalised digital advice gained wide support from the market during consultations last year, including from both small start-ups and large financial institutions.

An FMA review of KiwiSaver sales in 2015 found only three in 1,000 KiwiSaver sales or transfers occurred with personalised advice. We believe the introduction of personalised digital advice has the potential to improve consumer access to financial advice, especially for those with smaller sums to invest and KiwiSaver members.”

The FMA consulted on whether to grant an exemption to enable personalised digital advice to be provided under the current regime because it was being increasingly widely adopted off-shore. The FMA has a mandate to promote innovation and flexibility in financial markets.

It is important to note providers of personalised digital advice will not be licensed by the FMA. Any provider seeking to rely on this exemption must apply to the FMA showing its directors and senior managers meet good character requirements. The provider must also meet minimum standards demonstrating their capability and competency to provide the digital service.

The exemption will be granted subject to conditions that require providers to take an appropriate degree of care and to ensure consumer protection safeguards are in place. The conditions are consistent with the requirements that apply to Authorised Financial Advisers, who are human advisers able to offer personalised advice.

More details on how providers can apply to use the exemption and our response to submissions on the second public consultation can be found on our website here.

Providers are not able to offer personalised digital advice until they are named in the schedule to the exemption notice. When a provider is able to offer personalised digital advice, they will be listed on our website.

Contact:

Edwin Mitson
Senior Adviser, Media Relations
Tel: 021 706 036
[email protected]