Lime FS, based in Sydney, has voluntarily withdrawn two digital advice tools in response to objections raised by the Australian Securities and Investments Commission.

Digital advice, also known as robo-advice, is the provision of automated financial product advice by means of algorithms and software, without the direct involvement of human advisors.

Lime FS’s corporate authorised representatives, Plenty Wealth and Lime Wealth, are digital advice providers authorised to provide personal financial advice to consumers.

Plenty Wealth provided advice online about budgeting analysis, tax and investments. It reviewed HNWs' life insurance and recommended superannuation products to them. Lime Wealth provided advice (in the same way) about the establishment of self-managed super funds or SMSFs. (In Australia, 'super' is superannuation or pensions.) It also advised HNWs about purchasing property with superannuation, commencing and ceasing pensions and contributing to pensions.

After reviewing advice files from both these outfits, ASIC complained to Lime FS about the quality of online advice that their IT generating and criticised it for not monitoring that advice well.

ASIC did not think that the software asked enough questions about clients' objectives and/or needs. In some instances, the recommendations that the IT generated were in conflict with other recommendations that it had made, or with the goals of the clients themselves.

Lime FS decided to close down both online 'tools' for the foreseeable future.

ASIC's guidelines that govern digital advice to retail investors date from 2016 and are found in Regulatory Guide 255. All wealth firms in this area should monitor and test their algorithms.

Regulatory expert Nigel Morris-Cotterill has written: "The financial advisor's AI back end is pants. Of course, there are those who will say that the problem is not the machines but the quality of the algorithms and...the questionnaires. That's absolutely right and here both financial services businesses and regulators need to understand exactly what the use of such machines means. Unless the questions are set in-house and unless the algorithms are developed by in-house risk managers...then it's outsourcing. It makes no difference whether that's done in a remote call centre or a server in the basement - it's still outsourcing because the basis of the decisions is determined by someone outside the company's management structure."