Roboadvice will become possible as part of the review of the Financial Advisers Act. But the new rules will not come into effect until 2019 and the FMA is worried that is not fast enough.

It said it would mean an environment of reduced access to advice and barriers for innovation in the meantime.  "We have received strong feedback from providers that they would like to offer personalised roboadvice sooner."

It is seeking feedback on a proposal to grant a class exemption for roboadvice providers from the requirement that personal advice to retail clients be given by a natural person.

“Advice generated by a roboadvice tool (on a provider’s website or mobile app) will be treated as advice given by a financial advice provider. The class exemption would be granted under the FA Act to permit personalised roboadvice to be provided under the current law. The FA Act will be repealed when the law reform comes into effect and all FA Act exemptions will be revoked."

Director of regulation Liam Mason said the exemption could be in force by the end of the year, if it was decided to go ahead. He said it could be possible that roboadvice offers would enter the market by early next year.  "It's quite hard to gauge what the uptake would be. We've seen some interest already from a range of firms.:

The FMA said that should help to tackle New Zealand's advice gap, particularly for investors with small sums of money. Mason said a goal was to provide financial advice to those who were not currently receiving it, particularly around KiwiSaver,

But it said there were risks.

"Although roboadvice services are usually directed at consumers not currently served by existing providers, we recognise nevertheless that roboadvice could cause disruption to existing financial advisers with traditional business models.

"As with all advice, roboadvice carries a risk of poor consumer outcomes and there would be an associated reputational risk for the industry. Potential harm to consumers from unsuitable roboadvice or from the failure of one of the first roboadvice offerings could, in addition to the potential financial loss suffered by individual consumers, undermine consumer confidence and have a chilling effect on the development of this sector."

Mason said it was expected roboadvice would disrupt financial advice as a whole rather than specific advisers. He said the FMA had talked to a range of providers about services they wanted to offer, including big providers, AFAs and start-ups. "Some people are raring to go."

The exemption will not cover DIMS and will be limited to products that are easy to exit: KiwiSaver, managed funds, listed equity securities, Government bonds, listed debt, general insurance products and savings products and credit contracts, excluding mortgages.

The FMA said it could consider including personal insurance products but it had concerns some of them were not easily exited and the consequences of non-disclosure were high.

"Therefore, if included we are considering imposing a value cap or duration limit. This could limit the roboadvice to personal insurance products where: The sum insured is not more than $100,000 per product; or the duration is one year or less; or the contract can otherwise be cancelled easily."

It said it might also consider imposing an investment limit, such as $100,000 per client.