Roboadvice ahead of law reform
16 May 2017
The Financial Markets Authority is considering ways that roboadvice could be made possible before the new financial advice legislation kicks in.
The Financial Services Legislation Amendment Bill, which repeals and replaces the Financial Advisers Act, will clear the way for roboadvice to operate in New Zealand for the first time.
But lawyers said it was not happening fast enough.
Geoff Ward-Marshall, of DLA Piper, said the law would not change until 2019 under the current timeline. "Fintech is fast-moving and there is a real risk that New Zealand firms looking to operate in the roboadvice area will be left behind by their overseas competitors."
He said he had not seen any concerns raised about the introduction of automated advice during the Financial Advisers Act review process.
"Industry is ready and waiting for it... and bearing in mind the glaring advice gap, consumers need it."
Lloyd Kavanagh, chair and partner of Minter Ellison Rudd Watts, agreed: "I do think there is a risk of New Zealand being left behind as innovation develops pace around the world. That means the benefit, of making low cost independent advice available to the large numbers of New Zealanders who do not currently receive advice, would be delayed.
"In addition, if the innovation occurs elsewhere, and is only rolled out to NZ belatedly after having been designed to suit other markets, that means New Zealand loses the opportunity to develop its technology sector."
A spokeswoman for the Ministry of Business, Innovation and Employment said the concern was being addressed.
"We received feedback from some stakeholders that we should consider options to ensure the ability to provide roboadvice is not unduly delayed. We are currently analysing these submissions. The transitional arrangements will aim to strike a balance between ensuring New Zealand providers are not at a competitive disadvantage and that there are sufficient safeguards in place for investors," she said.
"MBIE has also discussed this matter with FMA. They say: 'The FMA has been considering ways to facilitate digital advice sooner than the law reform. We think this may be possible within our existing exemption powers, and we expect to publish our proposals through consultation next month, and will be looking for feedback on this'."
Binu Paul, managing director of Savvy Kiwi, said it was in lawyers’ interests to get robo activity kicking off soon. But he said start-ups should take care.
"I'd highly recommend focussing on the commercial viability rather than rushing into an untested opportunity if you have only limited capital.
"Personally my suggestion to parties waiting to launch roboadvisory services would be to focus on potential customers and how they might pay you rather than rushing into writing out checks for marketing and legal services, consultants or technology developers. That should be secondary to your primary goal, being your commercial model. Once you have identified a potentially successful model, then perhaps your first stop should be to get your legal framework and infrastructure etc sorted.”
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