ASIC claims to support robo-advice

In a submission to the Select Committee on Financial Technology and Regulatory Technology, ASIC has claimed it is "supportive" of robo-advice, though harbours concerns around its ability to meet the best interests duty.

The regulator said it has met with industry to discuss proposed models for robo-advice covering risk profiling and investment advice, superannuation strategies, life insurance, self-managed super fund establishment and holistic advice.

"Different types of digital advice models face different challenges in meeting their obligations, and this is likely to affect the trends in digital advice in Australia," ASIC said.

ASIC made mention of Lime FS recently agreeing to shutter its digital advice tools, saying that this was an example of robo where the regulator had concerns about the quality of advice given and how that advice was monitored.

Speaking to Financial Standard at the time of ASIC's announcement, Lime's director Greg Einfeld said it is extremely difficult to operate robo-advice in the Australian regulatory environment.

He said holistic advice was almost impossible to offer under ASIC's current approach to regulating robo-advice.

However, ASIC makes specific mention of holistic advice as one of the areas of financial advice where robo could meet unmet demand in this new submission.

Later in the submission, the regulator detailed its concerns that robo advisers might not be able to comply with best interests duty - for example, ASIC questioned how a robo-advice offering might be sure that the client understands the scope of the advice they are receiving.

"Natural persons who provide financial product advice to retail clients are required to meet the minimum training and competence standards for advisers in Australia," ASIC then said.

"For digital advice licensees to meet the organisational competence obligation in RG 105 Licensing: Organisational competence (RG 105), ASIC requires that a licensee has at least one responsible manager who meets the training and competence standards."

In other words, that the regulator expects those behind a robo-advice offering to have the level of competence expected of any financial adviser.

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