MAS seeks feedback on framework for digital financial advice

THE Monetary Authority of Singapore has proposed to facilitate the offering of robo or digital advisory services, while still adhering to the regulatory framework that governs financial advisors and fund managers.

Based on a consultation paper released today, there will not be separate licensing for digital advice. Instead there are a number of significant concessions under the current framework. For digital advisory firms who go the fund management route and target retail investors, it is proposed that the firms will not need to meet the track record and minimum assets under management (AUM) requirements.

Traditional fund managers who cater to retail investors need to have AUM of S$1 billion and a five-year corporate track record to obtain a full capital markets services licence.

Digital advisory firms must comply with some safeguards. One is that portfolios must be diversified and comprise non-complex assets. The firms must have key management staff with relevant collective experience in fund management and technology. They must also undertake an independent audit of the business within one year of operation.

Digital advisers who operate as licensed financial advisers will also be allowed to execute investment transactions and rebalance client portfolios in collective investment schemes without the need for an additional licence under the Securities and Futures Act. This exemption will be made available to non-digital advisers as well.

Digital advisers can also seek exemption to the requirement under the Financial Advisers Act to collect the full suite of information on clients' financial circumstances such as income level, subject to a number of safeguards. These safeguards include the provision of advice only on exchange traded funds (ETFs); controls to filter out unsuitable clients and identify inconsistent responses; and the provision of a risk disclosure statement alerting clients to the limitations of the advice.