The Australian Law Reform Commission (ALRC) has outlined two approaches to amending legislation to make it easier for firms to offer robo-advice.
The ALRC has been working on a review of the Corporations Act and financial services legislation in order to reduce its complexity and submitted its final report to the government on 30 November.
It has also issued additional information specifically on how technology such as robo-advice, crypto assets and buy now, pay later products are changing the financial services landscape.
There are two ways, it said, that legislation could be amended to make it easier to implement robo-advice. The first would be creating bespoke legislation, while the second would be amending legislation to the existing financial product regime.
Regarding bespoke legislation, the ALRC said this would be difficult as robo-advice is still an emerging technology – meaning legislation may need to be tailored and carved-out as the technology evolves in the future. It may also disincentivise firms that are looking to invest in the research and development of robo-advice.
“The risks of a bespoke legislative framework for any emerging technology include:
- Ensuring legislation is drafted to be sufficiently technology-neutral so that it does not become redundant as the technology evolves.
- If the legislative framework is restrictive or produces uncertainty, it may disincentivise firms looking to invest in research and development of the technology.
- If legislation is too prescriptive, it is likely to require tailoring, exemptions and carve-outs as the technology evolves.”
For the second option, it referenced how the Quality of Advice Review has already made recommendations which could improve uptake of “digital advice”, and that this is being consulted on currently in the government. While digital advice was excluded from the formal recommendations in the government’s response, it said it will test how digital advice models could operate.
The ALRC said: “Changes to financial advice provisions may be further supported by the ALRC’s reforms which aim to improve navigability and increase the adaptivity of the financial services legislative framework. A more navigable and adaptive legislative framework would facilitate the advancement of robo-advice technologies, and similar innovations, by making the legislation less costly to comply with.”
Last week, AMP announced it will be launching a digital advice product next year for its advice and superannuation businesses.
