Roboadvice gets closer to reality
Getting personalised financial advice from a ‘‘robot’’ may be a step closer to becoming reality.
The Financial Markets Authority (FMA) has asked for feedback on whether it should use its powers to allow personalised financial advice generated by a computer programme or algorithm, known as roboadvice.
The FMA believes roboadvice offers the potential to get advice out to the majority of people who have no access to a human financial adviser, especially advice on KiwiSaver.
But the Institute of Financial Advisers has concerns.
Under current law, personalised advice, which takes into account an individual client’s financial situation and goals, can only be delivered by a human being. But all over the world, roboadvice businesses have been emerging, especially in the investment space.
Proposed changes to financial adviser laws are designed to address this issue, but will not come into effect until 2019, and the FMA believes it can legally use its ‘‘exemption’’ powers as a temporary measure before new legislation is passed by Parliament.
The FMA’s Liam Mason said: ‘‘We’ve been looking at ways to enable innovation to help tackle the the advice gap in New Zealand, but also to mitigate the risk of poor consumer outcomes.
‘‘We are seeking to ensure we maintain the standards of consumer protection provided by the legislation while encouraging innovation that can help more people get help with investment decisions. Roboadvice offers a way to address the low numbers of consumers currently receiving personalised financial advice.’’
The FMA’s review of KiwiSaver sales and advice in 2015 found that only three in 1000 sales or transfers had occurred with personalised advice
Roboadvice had been increasingly adopted around the world and New Zealand companies had approached the FMA to discuss introducing digital financial advice tools here, Mason said.
The FMA’s proposals would allow personalised roboadvice, but would limit its use to ‘‘eligible’’ products like KiwiSaver, managed funds, general insurance like house and car insurance, shares, bonds and loans. These were all financial products that were easy to get out of.
The FMA will not be allowing roboadvice to recommend investments that lack liquidity, such as forestry investments.
If it does go ahead and use its exemption powers to speed roboadvice to market, the FMA would ensure that the public get told everything they need to know about the services, including how much the fees were.
But financial adviser Michael Dowling from the Institute of Financial Advisers says he suspects the FMA will be cautious about the kinds of roboadvice it allowed. ‘‘Our position is that fintech needs to be held to the same regulatory standards as human advisers.’’
That meant roboadvice services would have to be as competent, and abide by the same code of conduct that human advisers were. OPINION: Like an echo from a decade ago, the electricity industry is dusting off long-shelved contingency plans for dealing with cold, dry winters.
For the first time since 2008, inflows of water into South Island storage lakes are well below average, with water in Contact Energy’s Lake Dunstan catchment at an 85-year low over the past three months.
Further north, Meridian Energy is checking the special legislation allowing it to drain Lake Pukaki lower than normal.
In the North Island, Genesis Energy is eating into its coal stockpiles, running its two ageing Huntly power station units on a 60/40 combination of coal and natural gas.
It’s a rare demonstration of New Zealand’s need for fossil fuel backup in an electricity system that is usually sourced 80 per centplus from renewable energy.
And the small but savvy group of customers who have, until now, enjoyed low electricity prices through companies Flick Electric and Power to the People have been inundated with messages from their supplier warning that their prices are rising in line with recent spikes in wholesale electricity prices.
There’s no sign yet of anyone switching away from these newly established competitors, but this was always the risk their customers faced – volatile wholesale electricity prices creating larger, less predictable bills than the big savings they’ve enjoyed since such companies were established.
It’s unlikely there will be a dry winter electricity savings campaign or that the lower reaches of southern lakes will be breached.
It’s probable that Flick customers will return to paying substantially lower prices than the vast bulk of electricity consumers, who pay fixed tariffs that change only slowly to reflect changes in wider market conditions.
Notable too is the fact that even with a couple of short-term failures at Contact’s gas-fired plant near Stratford in recent days, wholesale prices haven’t spiked nearly as high as they have in earlier years.
The electricity market is showing some maturity, although it’s also notable that rising wholesale prices are also showing up in futures market prices for the next two years.
That suggests that the lengthy period of generation oversupply is starting to come to an end.
Higher prices will be the necessary spur to the sector to dust off the wide range of wind and geothermal electricity projects for which resource consents are held, waiting for the day when it became economic to build them.
Higher prices will also spur the emerging competitiveness of solar electricity generation, whose more strident boosters lost their battle in the High Court this week to get backing for their desire to be subsidised by non-solar electricity users.
The fight against the so-called ‘‘solar tax’’ has rightly been lost, although it didn’t stop Greenpeace from labelling New Zealand’s electricity system as ‘‘diseased’’.
The line will play well publicly. The issues are complex and solar power is on the side of the angels.
It’s hard to explain, let alone convince anyone, that the so-called solar tax is old-fashioned special pleading draped in laudable green sentiment. More to the point, the issue is a sideshow.
The real action in the electricity industry is in the rapid advance in battery technology, where costs are falling fast, making the prospect of rooftop solar generation that works at night and on rainy days a reality.
Much of the angst over the slow development of the solar industry reflects the relationship that’s traditionally existed between power companies and their customers: a monolithic provider offering too little choice or control to consumers. That is all about to change. –BusinessDesk