It what may be seen as troubling news for traditional insurance brokers, New Zealanders may soon have access to robo advice on financial investments and services as the MBIE consultation on a draft bill ended back on March 31. Once the reforms on the Financial Advisers Act (2008) are completed, financial robo advice is set to be cleared for the first time in the country.
The proposed legislative changes will remove the requirement in the 2008 Act that stated that financial advice only be given by a certified “natural person,” and will apply to all NZ financial services, including insurance.
“This legislative rewrite will open the door for automated, online investment advice to be given and for products to be automatically recommended that suit a person’s circumstances,” said Geoff Ward-Marshall, senior associate,
DLA Piper.
“New entrants to the NZ financial advisers market are already eyeing up the opportunity,” he said, with global spending on wealth management initiatives expected to grow to $12 billion from $4 billion between 2015 and 2019.
Ward-Marshall added that, in his opinion, robo advice would benefit many ordinary people.
“At the moment there is a whole section of the market for small investors in NZ that are under-advised in their investment decisions,” he said. “Financial advisers are typically most interested in those with more than $100,000 to invest. So robo advice could well suit those with less to invest.”
Under the current timeline, the reform won’t be passed until at least 2019, which puts NZ firms at risk of being left behind by their overseas competitors in the face of the fintech industry’s fast growth, said Ward-Marshall.
He also cited the need for the Financial Markets Authority to provide guidance notes and regulation on how robo advice will be operated in the country.
“In the Financial Advisers Act reforms there is nothing specific about the way robo advice will need to be given,” he said. “That will come later through regulation or guidance, as it has offshore.”
Ward-Marshall said that once robo advice is fully implemented, it is likely that existing financial advisers will team up with technology partners in order to deploy the new technology fast and efficiently.
“What’s most likely is that alliances will develop between start-ups with robo technology, and established market players such as banks who have a ready customer base,” he said.
Two other challenges to offering robo advice, he said, are obtaining capital to fund growth and developing a customer base.
“In the area of financial advice, nothing will stop your funding and lose your customers faster than a sanction from the regulator,” he explained. “Staying within the regulatory framework will be of utmost importance to anyone commencing a robo advice service.”
We’d love to know your thoughts, as insurance brokers, on the potential arrival of robo advice. Do you see these platforms as a threat – or do they present an opportunity to evolve your business model? Do clients really want them? Leave a comment below with your thoughts.
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