Advice scandals have plagued the financial services and superannuation industry for decades, causing irrefutable brand, reputation and financial damage, but they could be a thing of the past.

Digital advice technology, if properly designed and implemented, has the potential to eliminate advice failures by facilitating and monitoring the delivery of effective and compliant advice, leading to improved client outcomes.

Coupled with a traditional human adviser to provide validation and coaching, when required, it’s an unbeatable, scalable combination that’s able to restore consumer confidence in the financial service industry and lift demand for advice.

Recently the Australian Securities and Investments Commission (ASIC) released its guidance on providing digital financial product advice for retail investors (RG 255).

RG 255 examines key areas that organisations offering digital advice, or considering offering digital advice, need to consider such as monitoring and testing algorithms; filtering out unsuitable customers; regularly reviewing advice; and logging all activity.

This white paper – the first in a series that explores the digital advice opportunity in Australia – unpacks RG 255 and the digital advice opportunity.

What’s ASIC up to?

In ASIC’s Corporate Plan for 2016-17 to 2019-20, the regulator listed digital disruption, new business models and “complexity in financial markets and products, driven by innovation” as major long-term challenges and opportunities.

It cited heightened surveillance and fostering a “gatekeeper culture” in financial services and managing risks from digital disruption as key areas of focus in 2016/17.

“We will focus on managing the risks from structural change and disruption in financial markets and services arising from the rapid pace of technological developments. This includes new products and service delivery models that, if poorly implemented and operated, can undermine market integrity and trust and confidence,” the report stated.

However, ASIC also acknowledged that technological innovation had the potential to improve efficiency and be a “powerful force for competition, driving the development of products that better meet consumer needs and improve customer access”.

Digital advice is unquestionably a new advice model that can give more Australians affordable access to quality advice.

But the strength of leading digital advice solutions won’t be cool algorithms or beautiful front- ends, although they’re important. On that point, even the most creative front-ends and clever algorithms will be useless if they’re not compliant.

There’s room for both digital and human advisers and increasingly a hybrid omni-channel model that combines the two.

The strength of leading digital advice solutions will be the complementary relationship they have with human advisers to ensure clients’ needs are seamlessly met.

As the advice industry progresses further along the digital path, there’s a realisation that it doesn’t have to be one or the other.

There are complex situations beyond the scope of digital advice.

There are low-value clients that human advisers can’t service economically.

Our research reveals that ordinary Australians are unlikely to support a purely automated, online solution unless they know that there are capable, quali ed people behind it monitoring the advice they receive and ready to proactively step in when needed.

RG 255 demonstrates that ASIC wants that too.

Using the airline business as an analogy, there’s a reason why millions of travellers pay more to y with top airlines over budget carriers.

Both have automated systems for finding and booking flights and checking in, and 90 per cent of the time people will transact and y without a glitch but many travellers will happily pay more for the peace of mind knowing that they can pick up the phone at any point and speak to a trained, experienced person if they’re stuck.

How much more important is it for financial institutions dealing with peoples’ life savings, insurance needs and retirement dreams, to give their customers that certainty and confidence.

Read full White Paper

Source: Decimal

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