The corporate watchdog has published its guidelines for financial services companies offering so-called robo-advice in the burgeoning automated advice sector.
The Australian Securities and Investments Commission has laid out what constitutes personal advice as opposed to general advice to clarify when an Australian financial services (AFS) licence is required by companies providing automated advice using algorithms.
Five months after issuing its draft guidelines, ASIC also highlighted the need for rigorous testing of the algorithms used to provide recommendations through a website or app where users seek tailored financial advice.
ASIC said that, with only about 20 per cent of adult Australians seeking personal advice, digital advice has the potential to be a convenient and low-cost option for financial planning.
"ASIC supports the development of a healthy and robust digital advice market in Australia as a convenient, low-cost option for retail clients, and our guidance will help ensure that consumers can have confidence when they deal with digital advice providers," ASIC chairman Peter Kell said on Tuesday.
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Companies providing factual information, such as product comparison sites, do not need an AFS licence because the advice is not tailored to personal circumstances.
ASIC said that start-up fintech businesses wanting to provide digital advice must apply for their own AFS licence or become an authorised representative of an AFS licensee.
