trong>ERS). The ERS is an exemption that allows natural persons and businesses to trial innovative financial services or credit activities over a 24-month period without satisfying the requirement to obtain an AFSL. Additionally, businesses working with specific products or services such as credit products (loans, credit cards) or non-cash facilities may also be exempt.
Additional comments regarding the legal situation for asset and portfolio management services or what FinTech’s must be aware of in this business area
The regulatory system in Australia regarding licencing does allow ASIC to grant waivers or relief from the law to businesses. Whilst ASIC has the power to accept exemptions and grant relief from AFSL requirements, it also issues no-action letters to businesses; this ensures ASIC does not commence an action against a business for failing to comply with a requirement.
There are alternatives available to financial technology businesses that do not fall under an exemption or are not prepared to commit to an AFSL. Firstly, the business may have authorisation to operate its services under an existing AFSL holder. This creates a partnership between the business and the AFSL holder where the latter agrees to supervise and monitor the conduct of the former. Secondly, offshore businesses operating under a ‘sufficiently equivalent’ regulatory regime to Australian laws may have authorisation to provide financial services to wholesale clients in Australia. Thirdly, depending on the nature of services and contracts, businesses offering FinTech services to financial institutions may not require an AFSL.
Economic conditions
Market size for asset and portfolio management services and biggest companies in this business area
In Australia, the financial services sector is known as the most significant contributor to the national economy. As at March 2021, Australia’s asset and portfolio management industry had $2,464.5 billion of funds under management (Australian Bureau of Statistics, Managed Funds, Australia, Mar 2021, cat. no. 5655 (3 June 2021). In 2019, the top fund managers were State Street Global Advisors, Vanguard Investments, Colonial First State, BT Financial Group and MLC Investments.
Over half of investors rely on personalised planning services whilst the other half prefer advice on non-investment financial services such as insurance or banking. The COVID-19 pandemic has caused significant shifts in the market, with a move towards digital transformation, stronger competition, rising regulatory obligations and unpredictability in the economy. These changes have motivated asset management firms to reconsider their strategies, placing more emphasis on addressing investor views and needs whilst streamlining services using digital technology.
Additional comments regarding the economic situation for asset and portfolio management services or what FinTech’s must be aware of in this business area
The marketplace is changing, and this is impacting the behaviours, attitudes, and expectations of investors. Growing trends suggest investors are becoming more mindful; considering digital interactions; demanding greater integrity and transparency; and an increased willingness to change providers if their expectations are not being met. The shift towards investing with purpose is increasing and is forcing asset management firms to review their approaches. FinTech businesses with a social conscious or purpose and maintaining a client-focused approach will create opportunities to connect with investors, understand their needs and deliver direct services.