Thumbs up for roboadvice rules

New Zealand financial institutions are welcoming moves to allow roboadvice in this country.

Wednesday, April 27th 2016, 5:59AM

by Susan Edmunds

The Financial Advisers Act review is considering how roboadvice could be accommodated under the legislation covering advice. At present, the law requires financial advice to be provided by a human adviser.

In the options paper issued by the Ministry of Business, Innovation and Employment, it is suggested that financial advice could be permitted online if it is from a licensed entity, or that a hybrid option could be allowed where consumers must be given the option to speak to person if they needed to.

BNZ said it was in favour of enabling online advice because it was what consumers wanted.

“We estimate we are currently experiencing 400 digital interactions for every one face-to-face interaction and the trend is increasing.”

But it said opening up digital advice channels in New Zealand created the possibility that international operators could expose New Zealand customers to a greater risk of fraud or the sale of inappropriate products.

Almost all submitters said the requirements for digital advice licenses should be the same as other forms of advice, although some said only licensed entities should be permitted to provide it.

“With respect to the sale of product from roboadvice sites, AMP submits that there needs to be safeguards and sufficient controls in place over the providers and products that are connected to any roboadvice sites,” AMP said.

Advice group Share said clients, not the method of advice, were important.

“Regardless of the method of delivery, financial advice should always have the client’s best interests at heart, and be relevant and appropriate,” Share said.

“A competitive market will deliver innovation – whether that is in the product, pricing, promotion or delivery mechanism. As long as there is an identified customer need, one or more market participants will seek to fulfil that need. Legislation just needs to be a framework that ensures that there is a level playing field and that the customer receives quality advice and that they are at the heart of all decisions.”

There were concerns that roboadvice could be used as a method to distribute one particular provider’s product.

The Institute of Financial Advisers said the place for roboadvice in New Zealand should be to assist an adviser to deal effectively with smaller clients rather than replacing personal advice. “Experience overseas (US and Australia) has highlighted concerns around this form of advice delivery suggesting an increased proportion of the promoter’s product which creates a significant conflict of interest.”

Some, particularly bigger providers such as AMP, Westpac and ASB said it was not necessary to have a human adviser as a mandated option.

“Westpac's experience of providing banking services online is that where a consumer has chosen an online channel, there is little demand for the option to speak to an individual,” Westpac said.

Tags: Financial Advisers Act roboadvice