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FMA opens applications for personalised digital advice

26 February 2018

The Financial Markets Authority (FMA) is accepting 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 programme 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 Financial Advisers Act (2008). This law requires personalised financial advice to a retail client to be given by a human. Reforms to this law are expected to come into force in 2019 and will permit digital advice. When these reforms are introduced, this exemption will be revoked.

“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,” says Liam Mason, FMA’s Director of Regulation.

“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.

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.

Last updated on the 16th September 2019