Name
Global FinTech Guide
Country _ Name
Australia
SectionTitle
Financial advisory and broking services including robo advisory and auto-trading
Body
FinTechs belonging to this category offer advisory and broking services for investments usually through online platforms.

Robo advisory services usually offer an investment proposition following a series of questions concerning the personal financial background and the risk-bearing capacity of the user. Sometimes the respective platform also enables the user to directly execute the proposed investment.

Auto-trading concerns all services which automatically trade on behalf of the customer according to his or her specifications.

Apart from that, some FinTechs collect and offer merely or as an ancillary service market information or operate comparison portals to increase the transparency of the capital markets and to help the investors with their decision-making.

There are also FinTech-advertising-services which advertise various financial services or products.

Introduction

Attitude of the country towards modern financial advisory and broking services

The financial advisory and broking services have started to embrace the use of FinTech technologies such as robo advisory and auto-trading. However, they are not utilised to their full extent. The 2016 Backing Australian FinTech report published by the Australian Government recognised the potential of robo advice within the Australian financial advisory sector. The government collaborated with ASIC to assist in the uptake of robo-advice and provide further clarity around the compliance and regulation of the technology.

Legal affairs

Obligations and requirements to provide financial advisory and broking services, or ancillary services described above

The obligations and requirements of a FinTech financial advisory service are no different than a general financial advisory business. Offering a financial service in Australia is monitored primarily by ASIC, who are responsible for supervising the conduct and regulation of companies, financial markets, and professionals.

All people who offer a financial services business in Australia are required to hold an AFSL. Financial services are defined within the CA and includes providing recommendations or statements of opinion about financial products or dealing in financial products. A FinTech financial advisory would likely be considered as a financial service and be required to obtain an AFSL.

There are exemptions to the requirement of acquiring an AFSL. The Corporations (FinTech Sandbox Australian Financial Services Licence Exemption) Regulations 2020 introduced the Enhanced Regulatory Sandbox which allows a natural person or business to test their financial service without holding an AFSL. The criteria to satisfy are the net public benefit test and the innovation test. The cost of an AFSL varies depending on the customer type, and the level of risk.

Additional comments regarding the legal situation for financial advisory and broking services, or adjacent services or what FinTech’s must be aware of in this business area
There has been minor change since 2016 when the Australian Government published documents supporting the use of FinTechs. It can be expected that changes to AFSL as suggested in ASIC's 2016 consultation paper may be the next amendment within this space. The amendments that were flagged in the report focused on how AFSL can monitor and test the algorithms for the digital advice, and the obligation of organisational competence in how it applies in a digital context.

Economic conditions

Market size for financial advisory and broking services as well as adjacent services and biggest companies in this business area

The Financial advisory sector forms 12.9% of FinTechs in Australia. The Assets under management within the robo-advisory sector was 5,785,000,000 in 2021 according to Statista. There are currently eight (8) robo advice providers in Australia, with Stockspot, Investmart and Raiz Investments being some of the more prominent businesses in this area.

Additional comments regarding the economic situation for financial advisory and broking services as well as adjacent services or what FinTech’s must be aware of in this business area

Rainmaker Information in a 2021 report predicted that the market in Australia for robo advisory has the potential to reach $60 billion. This is double the amount predicted in its last estimate in 2018. The reason for the significant increase is the success of the US market, with rainspot extrapolating this information to determine the potential of the Australian market.

The report further points to the decrease in financial advisors' services, dropping from 28,000 in 2018 to 19,000 at the time of publication of the report in July 2021. The decrease in advisors within this sector opens up the opportunity for the greater use of FinTechs.

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