ASIC has today released its guidance on providing digital financial product advice for retail investors: Providing digital financial product advice to retail clients (RG 255).
The guide brings together some of the issues that digital advice providers need to consider when operating in Australia – from the licensing stage through to the actual provision of advice.
RG 255 also includes guidance on some issues that are unique to digital advice, such as how the organisational competence obligation applies to digital advice licensees and the ways in which digital advice licensees should monitor and test their algorithms.
ASIC's Deputy Chairman Peter Kell said, 'ASIC is committed to encouraging innovation that may benefit consumers. Our guidance on regulating digital advice is a useful starting point for those providing or intending to provide digital advice in Australia.
'ASIC supports the development of a healthy and robust digital advice market in Australia as a convenient, low-cost option for retail clients, and our guidance will help ensure that consumers can have confidence when they deal with digital advice providers,' he said.
ASIC recognises that digital advice continues to be developing area and digital advice providers are encouraged to contact ASIC if they have questions.
Background
Digital advice (also known as ‘robo-advice’ or ‘automated advice’) is the provision of automated financial product advice using algorithms and technology and without the direct involvement of a human adviser. It can comprise general or personal advice, and range from advice that is narrow in scope (for example, advice about portfolio construction) to comprehensive financial product advice.
The provision of digital advice has grown rapidly in Australia since 2014, with a number of start-up AFS licensees and existing AFS licensees developing digital advice models. This growth is expected to continue.
ASIC supports the development of a healthy and robust digital advice market. In an environment where only around 20% of adult Australians seek personal advice, we think that digital advice has the potential to offer an attractive, convenient and low-cost advice service to retail clients who may not otherwise seek advice.
In March 2016, ASIC released Consultation Paper 254 Regulating digital financial product advice (Refer: CP 254) which attached a draft Regulatory Guide on regulating digital advice and sought feedback on a number a proposals in relation to our draft guidance.
The consultation period for CP 254 closed in May 2016 and we received 38 submissions.
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