New Zealand’s major banks have all argued for an early pass to supply robo-advice services under the proposed new financial advisory regime, submissions published last week on the Financial Services Legislation Bill (FSL) reveal.
The bank submissions, included among a Ministry of Business, Innovation and Employment (MBIE) data dump of 113 FSL documents (out of 114 received), consistently call for an early entry for robo-advice services once the new regime goes live.
Under the FSL proposals, banks and other groups not already offering automated-advice services may have to wait out a two-year transition period before booting up the robots.
The bank proposals are separate from the current Financial Markets Authority move to introduce a form of robo-advice under existing legislation.
For example, the NZ Bankers Association (NZBA) FSL submissions says if institutions were required to obtain a full licence early in the piece that “would result in crystallisation of the competence requirement for the full adviser sales force”.
“The transitional regime therefore favours robo-advice only providers,” the NZBA submission says.
“To remove this barrier, NZBA submits that the transitional regime should be adjusted to allow for a robo-advice licence to be obtained first once a transitional licence has been received, whilst the status quo is preserved for other elements of the advice service.”
The NZBA represents 16 NZ-registered banks, including all the major Australian-owned brands and Kiwibank,
All individual bank submissions published by MBIE last week also echo the sentiment.
Online retail platform, Trademe, also weighed into the robo-debate, arguing “comparison” services, such as its LifeDirect insurance sales engine, should be specifically excluded from the regime.
“We think these comparison tools are an important consumer product, and should not be considered robo-advice platforms,” Trademe says in its submission.
Other common concerns unearthed in the 113 submissions include: potential confusion between the ‘financial adviser’ (FA) and ‘financial adviser representative’ (FAR) designations; lack of clarity around the definition and scope of the proposed ‘client interests first’ requirement; how the wholesale/retail division should be policed, and, how the ‘inappropriate incentives’ ban should be defined and applied across different financial advice providers (FAPs).
In what could represent the benchmark for future cross-industry FSL-related communications, the ASB submission says: “The duty in section 431O (FAPs to not offer inappropriate incentives) should apply to all FAPs, irrespective of whether they engage FAs or FARs. There is no valid basis to exclude FAPs that engage FAs from this duty.”
Knax Consulting, run by former Securities Commission executive, Angus Dale-Jones, points out in its submission that many advisers could choose to operate as FARs to avoid “personal professional responsibility”.
“The Australian regime has had to grapple with equivalent issues and has announced the transition to an approach that places far greater weight on individual professionalism, at the very moment that (with this bill) New Zealand is heading towards a model that introduces some of the Australian system’s current corporate licence deficiencies,” the Knax submission says.
Dale-Jones was helped draft and implement the Financial Advisers Act (2008) regime the FSL is slated to replace.
James Hartley, MBIE head of financial markets policy, said the government would carefully consider all submissions before drafting the final FSL legislation.
Hartley said backlash against the FAR designation and calls for greater clarity around the ‘client interests first’ principle were probably the two biggest issues arising out of the submissions.
“We’re rethinking the FAR label,” he said. “Most submitters support the client interest first idea but there’s some worry about how the draft defines the scope of that duty.”
In spite of the volume of submissions to process, Hartley said MBIE was on track to file draft submission in Parliament prior to the September general election.
“I’m fairly confident we can do that,” he said.