The New Zealand Government will change its financial advice regulations to allow robo-advice.

The step is among a range of recommendations made following a review of the Financial Advisers and Financial Service Providers acts.

The review found current legislation does not allow for advice from automated systems.

“The requirement was intended to ensure an individual is responsible for advice meeting the required standards,” the review’s report says.

“However, since the acts came into force there have been considerable advances in technology relevant to financial advice.

“Globally, technological developments in this area now see financial advice being produced by an algorithm that determines the client’s needs through their inputting of data.”

The report says most submissions to the review support robo-advice, so long as compliance and consumer protection are maintained.

The review also heard calls for higher education standards among advisers and a minimum qualification level for entry to the profession.

Most submissions call for a transition period towards higher education standards.

The report says the various designations for advisers in New Zealand can confuse consumers.

“The legislation sets terminology and advice distinctions that are unclear and confusing, preventing consumers from knowing where to seek advice from.

“The term ‘registered’ is often seen as superior to ‘authorised’ and may be wrongly interpreted as being associated with particular competencies or active regulation.”

The report recommends financial adviser designations be improved to make it clear agents are not individually accountable.

It also recommends a client-care obligation be introduced, requiring advisers and agents to ensure consumers are aware of their advice’s limitations.

Commerce and Consumer Affairs Minister Paul Goldsmith says the recommendations will lead to simpler regulations and encourage more people to seek advice.

The Government plans to release a discussion paper on legislation incorporating the changes, followed by a bill before the end of the year.

“I recognise changes will have an impact on… financial advisers,” Mr Goldsmith said. “The Government will work with advisers on possible transitional arrangements, to ensure they are reasonable in light of practicalities such as the need to meet higher competency standards.”