Kiwi robo rules may be similar to Australia's

New Zealand's future roboadvice providers may have to work to similar standards to those now being imposed on Australian operators.

Tuesday, September 6th 2016, 6:00AM

by Susan Edmunds

The Australian regulator has issued new guidance to offer more clarity to the sector.

It said roboadvisers will not have to have their advice processes and algorithms externally verified. Instead, the system will be largely self-monitored.

Providers will have to regularly test the algorithms they use – the extent of which will depend on the nature, scale and complexity of the business. All staff members will have to have a general understanding of the algorithm.

"We expect robust testing of algorithms to occur before digital advice is first provided to a client, and on a regular basis after that," it said.

All systems have to be fully documented and the customers will have to be aware of the nature of the advice provided, including any limitations.

The firms must also have at least one person who has a more in-depth understanding of the algorithm and is qualified to the level of a financial adviser.

ASIC said it could see a role for robo options in getting more consumers accessing financial advice.

“We think that digital advice has the potential to be a convenient and low-cost option for retail clients who may not otherwise seek advice."

The new guidelines will be of interest to New Zealand’s Ministry of Business, Innovation and Employment, which is currently working through the review of the Financial Advisers Act, which clears the way for roboadvice in this country.

Principal policy adviser Sharon Corbett said there would be similarities with the Australian regime.

“The revised regime for Financial Advice will be technology neutral, such that roboadvice platforms will be required to meet the same standards as a natural person providing advice,” she said.

“Similar to the Australian guidance, the means of meeting these standards may differ as relevant. For example, while a financial adviser or agent may be required to demonstrate competence through having passed a qualification, a roboadvice platform may have to demonstrate equivalent quality through algorithm and scenario testing. Any required roboadvice-specific guidance will be produced by the FMA in due course.”

Tags: roboadvice