Digital financial advice providers: How can a computer comply with the best interests duty?

  • Products fall within the general and personal advice categories will require an Australian Financial Services Licence (or an exemption). 
  • Existing licensees wishing to provide digital advice need to ensure their current authorisations allow
    them to extend their offering to digital advice. 
  • If embarking on the digital advice option it is likely you will be subject to additional ASIC scrutiny.

Robot arm shaking man's hand

FinTech is very much alive and kicking in Australia with robo-advice platforms busy trying to fill the gap between full service advice offerings and the provision of generic mass market investment information. Some of these robo-products are striking a chord, not only with investors tired of being left in the middle but also with superannuation funds and other financial providers who have recognised the opportunity robo-advice products present for their clients.

This article briefly examines the rise of robo-based advice products in Australia and some of the compliance and risk issues you should be aware of if you are keen to participate in this space. In particular, it provides guidance about these compliance risks and makes recommendations on how to plot a course which treats a safe path following the August 2016 release by ASIC of its Regulatory Guide 255 (RG 255).

Some initial takeaways

For those looking to participate in this space, there are a few tips to bear in mind.

  • While no new regulatory requirements are introduced by RG 255, parties seeking to offer robo-advice based products should expect an additional level of scrutiny from ASIC during the licence application process.
  • Given the increased regulatory burdens likely to accompany the provision of ‘personal’ advice-based products, you will need to carefully consider how to pitch your product. For example, you can offer ‘fact’ based products and avoid regulatory oversight, or push the boundaries using technology customised for individuals and thus trigger more stringent legal obligations.
  • You can expect further regulatory oversight as the digital advice industry matures. When operating in this space you will need to have the flexibility and willingness to adapt to meet any new regulatory requirements as they evolve moving forward.

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