Financial 'robo-advice' gets official OK

Paul Goldsmith. Photo / Supplied

A planned law change is to aid the rise of "robo-advice" in New Zealand and for Kiwis to get more financial guidance online.

The Government has proposed numerous changes to financial advice laws following a review. One of these will help enable organisations to provide robo-advice - a service where a computer uses algorithms to give a person financial advice.

Robo-advice has already gained traction across the Tasman, where heavyweights such as NAB and Macquarie have moved into the space.

These services could offer advice on everything from what KiwiSaver fund or insurance product is right for a person to a full retirement plan.

"Not everybody, particularly younger people - want to sit down and have a half hour conversation with somebody. They expect to be able to deal with a lot of these things through an app of some form and at the moment you can't do that ... we're trying to enable that to happen," Commerce and Consumer Affairs Minister Paul Goldsmith said yesterday.

The Financial Markets Authority would still have oversight of robo-advice providers, Goldsmith said.

The Government, in its proposed changes, is also planning to do away with existing categories of financial advisers.

Instead, the title "financial adviser" will only be able to be used by a licensed individual who takes personal responsibility for the advice they give.

Anyone offering advice on behalf of a firm will be referred to as a "financial agent". Like an individual financial adviser, these firms must be licensed by the FMA.

While the new law won't distinguish between the services they can provide, the Government believes that - in practise - agents would be able to offer more limited guidance than advisers.

Under the tabled moves, a new committee would develop a code of conduct and the required standards for industry participants.

The planned changes will also mean that everyone providing financial advice must put the needs of the consumer first and see those who don't penalised.

"In all cases, advisers and agents must put the consumers' interests ahead of their own regardless of the differing financial incentives offered by providers," said a Government fact-sheet on the proposed moves.

The changes would also simplify the disclosure that advisers or agents must give consumers. This disclosure will include key information, such as the commission being paid, any conflicts of interest and the limitations of the advice.

The Government aims to introduce a law making the changes to Parliament at the end of this year.

Tighter rules for register

The Government plans to raise the threshold that businesses must meet to make it on to the Financial Services Providers Register over concerns some overseas firms are abusing it.

The register is a list of people, businesses, and organisations that offer financial services. While all in the sector must be registered, this does not mean the entity in question is officially sanctioned by authorities.

The Financial Markets Authority can direct that companies be removed from the register where it is likely it provides a misleading impression about the extent to which it is regulated in New Zealand.

That FMA went on the offensive last year, booting more than 50 overseas firms off the register amid concerns some were taking advantage of the country's reputation of "being a well-regulated jurisdiction and a good place to do business".

Under proposed changes announced yesterday, the Government said entities could be on the register only if they were providing financial services to New Zealanders. They must also be providing these services from a business in New Zealand.