It is unclear if licensing exemptions will help grow out robo-advice in New Zealand
There is no such thing as robo-advice in New Zealand, but that might be about to change.
New Zealand's corporate regulator has indicated that it may fast-track the slow process of legalising robo-advice by granting exemptions directly to advisers.
While robo-advice is legal in most countries, it is criminal in New Zealand because of laws which allow only “natural persons” to advise. The laws are not scheduled to change until 2019.
The Financial Markets Authority has opened a consultation on whether exemptions should be granted. If given the green light, robo-advice could be permitted in late 2017, two years ahead of schedule.
“We’ve been looking at ways to enable innovation to help tackle the advice gap in New Zealand, but also to mitigate the risk of poor consumer outcomes,” said Liam Mason, FMA Director of Regulation.
“Robo-advice offers a way to address the low numbers of consumers currently receiving personalised financial advice.”
The consultation comes in response to the FMA’s own research which has found that Kiwi financial advisers work overwhelmingly for people with more than NZ$200,000 to invest.
The FMA has indicated early on that mortgages will be excluded from the exemptions and robo-advice will be permitted only for safer financial products.
It remains unclear how much the exemptions will help, as robo-advisers hoping to operate in New Zealand face more challenges than just regulation.
In the first instance, Kiwi exchange traded funds are few in number. Most robo-advisers use ETFs because they are cheap and easy to strategise with. Low ETF numbers mean that even if robo-advice was legalised, there’d be fewer options for advisers.
The other issue, highlighted by Stockspot CEO Chris Brycki, was that robo-advisors are struggling to find Kiwi banks to partner with.
“For us the legislation is not the impediment, it is more the banking side of things,” Mr Brycki told the New Zealand Herald.
“Even if the regulations are changed that is not going to mean it is easy for providers to set up the service.”
Without a bank partner, robo customers cannot set up accounts easily and robo-advisers from abroad will struggle to hedge currencies.
This article first appeared on www.roboadvicenews.com
21 March 2023
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