ASIC has released a consultation paper CP 254 Regulating digital financial product advice and a draft Regulatory Guide on the regulation of robo-advice to retail clients.

Digital advice (also known as ‘robo-advice’ or ‘automated advice’) is the provision of automated financial product advice using algorithms and technology and without the direct involvement of a human adviser. It can comprise general or personal advice, and range from advice that is narrow in scope (e.g. advice about portfolio construction) to comprehensive financial product advice.

The consultation paper sets out ASIC’s proposed approach to the regulation of digital financial advice in Australia.

ASIC proposes that:

• to comply with the organisational competence obligation, digital advice licensees must have at least one responsible manager who meets the minimum training and competence standards for advisers (i.e. natural persons who provide financial product advice to retail clients).
• To ensure that good quality advice is provided to clients, digital advice licensees offering digital advice services must ensure that the algorithms underpinning the digital advice are properly designed, monitored and tested.

ASIC’s draft regulatory guide brings together some of the issues that persons providing, or intending to provide, digital advice to retail clients need to consider when operating in Australia—from the licensing stage (i.e. obtaining an Australian financial services (AFS) licence) through to the actual provision of advice.