Robots soon to offer financial advice in New Zealand

(Getty)
(Getty)

The Government is clearing the way for "robo-advisers" to offer financial advice in New Zealand.

"Robo-advice" is advice that is offered by a computer programme rather than by a person.

It is one of a number of changes the Government wants to make to the Financial Advisers Act (FAA) and the Financial Service Providers Act (FSPA).

Commerce and Consumer Affairs Minister Paul Goldsmith hopes to make it easier for people with smaller sums of money to get advice.

"The changes come after a comprehensive review, which will simplify regulation, enable advisers to have sensible conversations and encourage more people to seek high quality advice tailored to their needs."

Among the changes will be the introduction of robot advisers.

Currently many advisers require people to have a specified amount of money before they will take them on as a client. That sum could be $100,000 or even more.

The advisers require larger sums because they charge their clients a percentage of the assets under management. This fee could be one percent of the funds per year.

Robo-advice has grown in popularity overseas because the fees are generally lower, it appeals to younger people and to people with smaller amounts of money.

The Ministry of Business, Innovation and Employment (MBIE) says online advice is "emerging abroad and has the ability to provide consumers with a convenient, more affordable means of accessing financial advice".

The Ministry says the firms wishing to provide advice through robot platforms will need to obtain a licence from the Financial Markets Authority.

"Robo-advice will need to meet the same standards as a person providing advice; however the means of meeting these standards will differ. For example, while a financial adviser may be required to demonstrate competence through having passed a qualification, a robo-advice platform may have to demonstrate equivalent quality through algorithm and scenario testing."

MBIE says: "All individuals or robo-advice platforms providing financial advice will be required to place the interests of the consumer first and to only provide advice where competent to do so."

"All financial advice will also be subject to a Code of Conduct, where standards will be set that are consistent with those legislative obligations. We expect the standards in the Code to vary for different types of advice. For example, competency standards would differ for general insurance and investment advice."

Mr Goldsmith says "All providers of financial advice are now required to be more transparent about limitations on their advice and disclose information regarding conflicts of interest, such as commissions."

"Focusing on consumer interest and improved transparency will improve confidence in the regulation of the financial advice industry."

The changes include:

A bill containing the new rules is expected to be introduced to Parliament this year.

More details can be found here.

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