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FinTechs belonging to this category offer advisory and broking services for investments usually via an internet platform.
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 investor with his 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 accordi