Australian regulator endorses robo-advisor model
At an industry event today, Greg Medcraft, chairman of ASIC, stated that computer-generated financial advice could slash investment costs and eliminate conflicts of interests. Major domestic banks have been embroiled in advice scandals over the past couple of years. The regulator has established a taskforce to investigate the suitability of potential entrants and aims to pursue a collaborative approach to regulation with the innovators in the sector; which is at an earlier stage than in the US and Europe. Stockspot is considered the leading player in the field, with new firms such as Ignition Wealth and Clover launching this year. In September, as reported in our briefings, NAB launched a digital advice platform, but it fell short of recommending specific products. 

Australian Securities and Investments Commission chairman Greg Medcraft says computer-generated financial advice, or "robo advice" could slash investment costs and eliminate conflicts of interest in the maligned financial planning industry.

ASIC has established a "robo-advice taskforce", which is investigating the suitability of potential entrants, who use computer algorithms to match investors with suitable assets at a lower cost than human advisers.

ASIC boss Greg Medcraft has endorsed the power of computer-generated financial advice. Credit: Michele Mossop

ASIC wants to know how they intend to comply with best interest duties, how algorithms are developed and tested, and how the people running the start-ups are trained and compensated.

In a speech to a Finsia lunch in Sydney on Thursday, Mr Medcraft said ASIC believed digital financial advice was going to grow rapidly, which required the regulator to put strategies in place to ensure it understood the risks so customers could have trust in the market.