Digital advice providers

To help complete your Innovation Hub application form, please check if these pointers are relevant to your fintech business.

Do I provide digital advice?

Financial advice comprises general or personal advice, and ranges from information that is narrow in scope to comprehensive financial product advice. It ordinarily involves providing an opinion or recommendation intended to influence a person to make a financial decision. Personal financial advice considers a person’s individual circumstances or objectives, whereas general advice does not.

Digital advice (also known as 'robo-advice' or 'automated advice') is the provision of automated financial product advice using algorithms and technology without the direct involvement of a human adviser.

ASIC’s guidance on regulating digital advice

Regulatory Guide 255 Providing digital financial product advice to retail clients (RG 255) is guidance that aims to assist industry to understand ASIC's approach to regulatory digital advice. This guidance builds on existing ASIC guidance (including Regulatory Guide 36 Licensing: Financial product advice and dealing) because the obligations that apply to the provision of traditional financial product advice and digital advice are the same.

RG 255 should be read in conjunction with other ASIC regulatory guides that may be relevant to providing digital advice.

Licensing of digital advice providers

If your business provides financial product advice, you will need to obtain an Australian Financial Services (AFS) licence or act as a representative of an AFS licensee. If you are an existing AFS licensee intending to provide digital advice, you will need to consider whether your license authorises you to offer digital advice.

It is important to note that you may be exempt or be given relief from the requirement to hold an AFS licence in some circumstances. For further information see Regulatory Guide 167 Licensing: Discretionary powers (RG 167).

Whether your business is designed to provide factual information, general advice or personal advice is a regulatory issue that you will also need to consider. If you provide general or personal advice you will need to have an AFS licence or be an authorised representative of an AFS licensee. You do not need to hold an AFS license to give factual information to clients. For further information see Regulatory Guide 244 Giving information, general advice and scaled advice (RG 244).

In RG 255, we have outlined our minimum expectations for digital advice providers offering scaled advice to comply with the ‘best interests duty’. (For further information refer to RG 255 and RG 244 which outlines the minimum requirements for scaled advice (which is limited advice)).

Conduct and disclosure obligations

If your fintech business provides financial product advice to retail clients, you must comply with certain conduct and disclosure obligations.

Communicating with clients is an important part of providing digital advice. Because there is no 'natural person' (i.e. human advisor) directly involved in providing advice, it is especially important to consider digital communications (including your website), disclosure, and how you will monitor and test the algorithms that underpin the advice.

For further information refer to Regulatory Guide 175 Licensing: Financial product advisers – conduct and disclosure.

Resourcing and competency obligations

Digital advice licensees should have at least one responsible manager who meets the training and competence standards for advisers (i.e. natural persons who provide financial product advice to clients).

Depending on the nature, scale and complexity of your digital advice business, you may wish to outsource certain functions. If you choose to outsource functions relating to digital advice algorithms and the review of advice generated by algorithms, we expect you to have people within your business who understand these functions and to monitor this arrangement.

For further information about what ASIC looks for when we assess compliance with the organisational competence requirement under the Corporations Act refer to Regulatory Guide 105 Licensing: Organisational competence.

Your general obligations if you need an AFS licence

If you need an AFS licence you will be required to demonstrate that you meet certain general requirements relating to your organisational capacity, education and training levels, risk management systems and financial position. You must also comply with certain conduct and disclosure obligations. Refer to Regulatory Guide 104 Licensing: Meeting the general obligations and Regulatory Guide 168 Disclosure: Product Disclosure Statements (and other disclosure obligations) for more information.

For guidance about how to satisfy some of the other AFS general licensee obligations, see Regulatory Guide 165 Licensing: Internal and external dispute resolution and Regulatory Guide 166 Licensing: Financial requirements and Regulatory Guide 181 Licensing: Managing conflicts of interest.

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Last updated: 01/05/2019 04:51