New Zealand: FMA releases robo-advice exemption consultation


The Financial Markets Authority (FMA) is consulting on a proposed exemption to facilitate personalised robo-advice, which it may grant in late 2017.

Investment product providers and advisers should consider making submissions on the FMA's consultation paper by 19 July 2017.

The Problem – The FAA restricts personalised robo-advice

The Financial Advisers Act 2008 (FAA) requires that personalised financial advice be provided to retail clients by a natural person, effectively prohibiting such advice through robo-advice platforms or digital channels.

Chapman Tripp and others noted in recent submissions on the financial advice reforms that the proposal to remove this restriction, which would not come into effect until 2019,1 would come too late for many providers, who want to deliver personalised robo-advice now.

Chapman Tripp submitted that we would "support a move by the FMA to grant targeted exemptions from existing FAA requirements allowing robo-advice to be provided ahead of the new regime". The FMA should be commended for now pursuing this initiative.

The proposed robo-advice exemption

Exemption limits

The FMA's proposed robo-advice class exemption:

  • would be limited to financial advice or investment planning services (i.e. it would not extend to discretionary investment management services)
  • would be limited to advice on products which are easy to exit including highly liquid or readily transferrable products (like KiwiSaver)2
  • may include a client investment limit restricting the service to clients seeking advice on assets for investment under a certain amount (e.g. $100,000)
  • may include a total investment limit restricting the total value of products that a robo-advice service can advise on (e.g. $5 million to reduce the level of harm if a robo-advice service fails), and
  • would provide a two year transition period to the new FAA regime.

Exemption conditions

Providers using the class exemption may be required to:

  • notify the FMA before relying on the exemption and include a notice that advises users that the provider is relying on the exemption
  • give the client disclosure about the robo-advice service, including on the scope and limitations of its advice, how it uses information, how tailored its advice is, what fees must be paid, what conflicting incentives might exist, and how complaints are made
  • comply with conduct obligations to place the client's interests first, take reasonable steps to ensure the advice is suitable, and not bring the industry into disrepute
  • maintain appropriate capability and expertise
  • establish filtering processes to exclude clients for whom the advice is not suitable
  • conduct regular reviews and monitoring to test the quality of the advice produced, and the underlying algorithms used by the tool
  • have adequate risk management and information security systems, and
  • manage complaints, keep records, and report significant issues to the FMA.

The conditions may be applied proportionately to the size and scale of the service offered.

Practical considerations will dictate whether firms wish to meet these conditions. Robo-advice platforms have high up-front capital costs, require a compelling business case, and must be constantly monitored to ensure the advice provided is accurate, appropriate and adequate.

Issues for submission

Several topics in the consultation paper should be considered by anyone making a submission.

Are client investment limits appropriate?

Managed investment schemes may find limits unnecessarily restrictive, difficult to implement, or easily circumvented. This is particularly so for KiwiSaver, where the advice gap is most acute, and where sums invested are likely to exceed the proposed $100,000 ceiling, especially over time.

Is a total investment amount limit appropriate?

A $5 million total investment limit – which, to our knowledge, exists nowhere else in the world – may be difficult to track and may be unnecessarily restrictive. Larger providers may quickly meet this limit, limiting their clients' access to robo-advice.

Should disclosure be prescribed or flexible?

A prescribed form of disclosure ensures key warnings can be conveyed efficiently. However, prescribed statements may need tailoring where they would otherwise be inaccurate or misleading. More descriptive content such as risk descriptions require flexibility to cover different circumstances.

Should other eligible products be included?

Overseas regimes such as Australia do not, to our knowledge, restrict the types of products that robo-advice platforms can advise on.

Overseas practice

Overseas jurisdictions have developed, or are developing, guidance on robo-advice which submitters may wish to consider:

  • Australia has permitted robo-advice for several years. The Australia Securities and Investments Commission (ASIC) released Guidance in August 2016 on digital advice. The FMA's consultation paper contains elements that are found in Chapter D of the ASIC Guidance on 'Providing scaled advice in the best interests of the client'.
  • The United Kingdom has a well-developed robo-advice market. The Financial Conduct Authority has operated a Digital Advice Unit since June 2016 that works with firms developing robo-advice platforms.
  • Singapore permits robo-advice platforms through technology neutral regulation. The Monetary Authority of Singapore released a consultation paper on governance and supervision of Digital Advisory Services in June 2017.
  • Hong Kong has one of the most sophisticated markets for robo-advice platforms. The Hong Kong Securities and Futures Commission released a consultation paper on proposed guidelines on Online Distribution and Advisory Platforms in May 2017.
  • The United States has permitted robo-advice platforms since 2005 and has the largest robo-advice market globally. FINRA released a report on Digital Investment Advice in March 2016 that illustrates the growth of these platforms.
  • Europe permits the provision of robo-advice. The Joint Committee of European Supervisory Authorities released its report on Automation in Financial Advice in December 2016 and regulates such platforms through several EU Directives.

The FMA's proposed class exemption will ensure that New Zealand's regulations align with those that are being developed in other jurisdictions.


If you would like information on offering robo-advice in New Zealand, or wish to discuss making a submission (due 19 July 2017), please contact any of the lawyers featured.

Quick Links

Chapman Tripp is the only law firm in New Zealand that has submitted at every stage of the Financial Advisers Act reform process.

MBIE Feb 2017 Consultation Date
MBIE Consultation Document on the New Financial Advice Regime 17 Feb 2017
MBIE Fact Sheet on the New Financial Advice Regime 17 Feb 2017
MBIE Exposure Draft of the Financial Services Legislation Amendment Bill 17 Feb 2017
Chapman Tripp
Submissions on the Financial Advice Regime Exposure Draft 30 April 2017
Client Alert on new Financial Advisers and Service Providers Regime 17 Feb 2017
Brief Counsel on FinTech Regulation in Australia – Lessons for New Zealand? 4 Oct 2016
Brief Counsel on the new direction for the Financial Advisers' Regime 15 July 2016
Brief Counsel on the FMA's noted issue of churn in the life insurance industry 1 July 2016
Brief Counsel on the Reserve Bank's view of digital disruption in banking 27 June 2016
Brief Counsel on the Reserve Bank's view of digital disruption in banking 27 June 2016
Submission on the Review of the FAA Reform Options 26 Feb 2016
Submission on the Review of the FSPA Reform Options 26 Jan 2016
Submission on the Review of the FAA and FSPA Reforms 13 Oct 2015


1 The Minister recently announced that the Financial Services Legislation Amendment Bill containing the detail of the reforms is intended to be introduced in late June 2017.

2 The proposed eligible products are: KiwiSaver schemes and other managed investment schemes; listed equity securities; government bonds; listed debt; general insurance products (home, contents, vehicle); savings products and credit contracts (excluding mortgages).

The information in this article is for informative purposes only and should not be relied on as legal advice. Please contact Chapman Tripp for advice tailored to your situation.

To print this article, all you need is to be registered on

Click to Login as an existing user or Register so you can print this article.

Some comments from our readers…
“The articles are extremely timely and highly applicable”
“I often find critical information not available elsewhere”
“As in-house counsel, Mondaq’s service is of great value”

Related Topics
Related Articles
Up-coming Events Search
Font Size:
Mondaq on Twitter
Register for Access and our Free Biweekly Alert for
This service is completely free. Access 250,000 archived articles from 100+ countries and get a personalised email twice a week covering developments (and yes, our lawyers like to think you’ve read our Disclaimer).
Email Address
Company Name
Confirm Password
Mondaq Topics -- Select your Interests
 Law Performance
 Law Practice
 Media & IT
 Real Estate
 Wealth Mgt
Asia Pacific
European Union
Latin America
Middle East
United States
Worldwide Updates
Registration (you must scroll down to set your data preferences)

Mondaq Ltd requires you to register and provide information that personally identifies you, including your content preferences, for three primary purposes (full details of Mondaq’s use of your personal data can be found in our Privacy and Cookies Notice):

  • To allow you to personalize the Mondaq websites you are visiting to show content ("Content") relevant to your interests.
  • To enable features such as password reminder, news alerts, email a colleague, and linking from Mondaq (and its affiliate sites) to your website.
  • To produce demographic feedback for our content providers ("Contributors") who contribute Content for free for your use.

Mondaq hopes that our registered users will support us in maintaining our free to view business model by consenting to our use of your personal data as described below.

Mondaq has a "free to view" business model. Our services are paid for by Contributors in exchange for Mondaq providing them with access to information about who accesses their content. Once personal data is transferred to our Contributors they become a data controller of this personal data. They use it to measure the response that their articles are receiving, as a form of market research. They may also use it to provide Mondaq users with information about their products and services.

Details of each Contributor to which your personal data will be transferred is clearly stated within the Content that you access. For full details of how this Contributor will use your personal data, you should review the Contributor’s own Privacy Notice.

Please indicate your preference below:

Yes, I am happy to support Mondaq in maintaining its free to view business model by agreeing to allow Mondaq to share my personal data with Contributors whose Content I access
No, I do not want Mondaq to share my personal data with Contributors

Also please let us know whether you are happy to receive communications promoting products and services offered by Mondaq:

Yes, I am happy to received promotional communications from Mondaq
No, please do not send me promotional communications from Mondaq
Terms & Conditions (the Website) is owned and managed by Mondaq Ltd (Mondaq). Mondaq grants you a non-exclusive, revocable licence to access the Website and associated services, such as the Mondaq News Alerts (Services), subject to and in consideration of your compliance with the following terms and conditions of use (Terms). Your use of the Website and/or Services constitutes your agreement to the Terms. Mondaq may terminate your use of the Website and Services if you are in breach of these Terms or if Mondaq decides to terminate the licence granted hereunder for any reason whatsoever.

Use of

To Use you must be: eighteen (18) years old or over; legally capable of entering into binding contracts; and not in any way prohibited by the applicable law to enter into these Terms in the jurisdiction which you are currently located.

You may use the Website as an unregistered user, however, you are required to register as a user if you wish to read the full text of the Content or to receive the Services.

You may not modify, publish, transmit, transfer or sell, reproduce, create derivative works from, distribute, perform, link, display, or in any way exploit any of the Content, in whole or in part, except as expressly permitted in these Terms or with the prior written consent of Mondaq. You may not use electronic or other means to extract details or information from the Content. Nor shall you extract information about users or Contributors in order to offer them any services or products.

In your use of the Website and/or Services you shall: comply with all applicable laws, regulations, directives and legislations which apply to your Use of the Website and/or Services in whatever country you are physically located including without limitation any and all consumer law, export control laws and regulations; provide to us true, correct and accurate information and promptly inform us in the event that any information that you have provided to us changes or becomes inaccurate; notify Mondaq immediately of any circumstances where you have reason to believe that any Intellectual Property Rights or any other rights of any third party may have been infringed; co-operate with reasonable security or other checks or requests for information made by Mondaq from time to time; and at all times be fully liable for the breach of any of these Terms by a third party using your login details to access the Website and/or Services

however, you shall not: do anything likely to impair, interfere with or damage or cause harm or distress to any persons, or the network; do anything that will infringe any Intellectual Property Rights or other rights of Mondaq or any third party; or use the Website, Services and/or Content otherwise than in accordance with these Terms; use any trade marks or service marks of Mondaq or the Contributors, or do anything which may be seen to take unfair advantage of the reputation and goodwill of Mondaq or the Contributors, or the Website, Services and/or Content.

Mondaq reserves the right, in its sole discretion, to take any action that it deems necessary and appropriate in the event it considers that there is a breach or threatened breach of the Terms.

Mondaq’s Rights and Obligations

Unless otherwise expressly set out to the contrary, nothing in these Terms shall serve to transfer from Mondaq to you, any Intellectual Property Rights owned by and/or licensed to Mondaq and all rights, title and interest in and to such Intellectual Property Rights will remain exclusively with Mondaq and/or its licensors.

Mondaq shall use its reasonable endeavours to make the Website and Services available to you at all times, but we cannot guarantee an uninterrupted and fault free service.

Mondaq reserves the right to make changes to the services and/or the Website or part thereof, from time to time, and we may add, remove, modify and/or vary any elements of features and functionalities of the Website or the services.

Mondaq also reserves the right from time to time to monitor your Use of the Website and/or services.


The Content is general information only. It is not intended to constitute legal advice or seek to be the complete and comprehensive statement of the law, nor is it intended to address your specific requirements or provide advice on which reliance should be placed. Mondaq and/or its Contributors and other suppliers make no representations about the suitability of the information contained in the Content for any purpose. All Content provided "as is" without warranty of any kind. Mondaq and/or its Contributors and other suppliers hereby exclude and disclaim all representations, warranties or guarantees with regard to the Content, including all implied warranties and conditions of merchantability, fitness for a particular purpose, title and non-infringement. To the maximum extent permitted by law, Mondaq expressly excludes all representations, warranties, obligations, and liabilities arising out of or in connection with all Content. In no event shall Mondaq and/or its respective suppliers be liable for any special, indirect or consequential damages or any damages whatsoever resulting from loss of use, data or profits, whether in an action of contract, negligence or other tortious action, arising out of or in connection with the use of the Content or performance of Mondaq’s Services.


Mondaq may alter or amend these Terms by amending them on the Website. By continuing to Use the Services and/or the Website after such amendment, you will be deemed to have accepted any amendment to these Terms.

These Terms shall be governed by and construed in accordance with the laws of England and Wales and you irrevocably submit to the exclusive jurisdiction of the courts of England and Wales to settle any dispute which may arise out of or in connection with these Terms. If you live outside the United Kingdom, English law shall apply only to the extent that English law shall not deprive you of any legal protection accorded in accordance with the law of the place where you are habitually resident ("Local Law"). In the event English law deprives you of any legal protection which is accorded to you under Local Law, then these terms shall be governed by Local Law and any dispute or claim arising out of or in connection with these Terms shall be subject to the non-exclusive jurisdiction of the courts where you are habitually resident.

You may print and keep a copy of these Terms, which form the entire agreement between you and Mondaq and supersede any other communications or advertising in respect of the Service and/or the Website.

No delay in exercising or non-exercise by you and/or Mondaq of any of its rights under or in connection with these Terms shall operate as a waiver or release of each of your or Mondaq’s right. Rather, any such waiver or release must be specifically granted in writing signed by the party granting it.

If any part of these Terms is held unenforceable, that part shall be enforced to the maximum extent permissible so as to give effect to the intent of the parties, and the Terms shall continue in full force and effect.

Mondaq shall not incur any liability to you on account of any loss or damage resulting from any delay or failure to perform all or any part of these Terms if such delay or failure is caused, in whole or in part, by events, occurrences, or causes beyond the control of Mondaq. Such events, occurrences or causes will include, without limitation, acts of God, strikes, lockouts, server and network failure, riots, acts of war, earthquakes, fire and explosions.

By clicking Register you state you have read and agree to our Terms and Conditions