FPA warns that automation doesn’t always equate to innovation
The Financial Planning Association (FPA) has warned the Government against allowing too much leeway with respect to the so-called regulatory sandbox, warning that just because a business is highly automated does necessarily make it innovative.
In a submission lodged with the Treasury this week, the FPA said that while it was prepared to support a framework in which the Australian Securities and Investments Commission (ASIC) gives special weight to applications for relief for truly innovative business ideas, especially the testing of ideas, it was dubious about what represented innovation.
“To be clear, a heavily automated business is not necessarily innovative. Nor is yet another automated risk profiling tool or an [exchange traded fund] ETF investing tool,” the FPA submission said.
It said firms should be made to demonstrate they are genuinely innovative.
“Simply being heavily automated is not enough,” the submission said. “A close investigation is required to decide whether the firm is offering something genuinely novel and beneficial.”
The FPA said it would also be supportive of special consideration being given to the size of a firm, in circumstances where smaller firms might find it particularly difficult to enter the market.
“But, again, being small and heavily automated does not make a firm truly innovative (let alone innovative enough to outweigh the extra risk),” it said.
“In summary, a general exemption is inappropriate as there is a need to ascertain whether there is a net benefit,” it said. “This requires a close examination and a judgement. We should not let our excitement for the idea of innovation blind us to the risks.”
Recommended for you
Following an extraordinary general meeting today, Dixon Advisory parent company E&P Financial Group’s shareholders have voted on its proposed delisting from the ASX.
While overall financial adviser numbers have dipped below 15,500 this week, Rhombus Advisory is experiencing growth and approaching 500 advisers in its ranks.
Iress’ Xplan continues to dominate the financial planning software market with a multitude of uses, according to Netwealth research, despite newer players battling for a piece of the pie.
ASIC has shared the percentage of breach reports related to financial advice in FY24, noting increased reporting by smaller AFSLs.
