Financial advisers are keen on regtech but don’t like digital advice according to ASIC, which provided feedback on its landmark consultation into affordable advice as part of a Parliamentary Joint Committee hearing held in March.
In response to a question from Liberal MP Bert van Manen that was taken on notice by Commissioner Danielle Press, ASIC published this week a series of observations about advisers’ views on technology.
The common view, ASIC reports, is a widespread reluctance among advisers to embrace investment technology solutions that fall under the ‘digital advice’ umbrella.
“There is very little appetite for digital advice among existing advisers,” ASIC stated after going through 469 submissions from advisers, licensees and other industry stakeholders.
Of the 183 respondents who answered a specific question around regtech and digital advice, ASIC reported, 134 said they did not want to provide digital advice in the future.
“Overwhelmingly, advisers seemed to want [regtech] as opposed to the investment type of fintech,” commented Press at the hearing.
Advisers cited development costs, lack of demand and the consumer’s preference for a human adviser as reasons for avoiding digital advice.
“Most considered that digital advice is only suited to simple advice needs and younger people,” ASIC stated. “Respondents also noted that existing technologies often ‘promise a lot’ but in practice do not integrate data well… and do not allow for adequately tailored advice and strategies.”
Advisers acknowledged that utilising technology is the only way affordable advice can be provided to more Australians, ASIC said, and that technology has a broader role to play in compliance areas.
The limitations, however, outweigh the benefits according to respondents.
Digital advice is only commercially feasible “at scale”, they say, as only larger entities with the resources and systems in place to make it work can do so profitably. Advisers also believe digital advice is only useful for ‘single use’ advice, and is less conducive to building long-term relationships with clients.
Some respondents, ASIC said, also remain concerned that clients could be impacted by poor quality outcomes if information is provided or inputted incorrectly.
“Algorithms are not advanced enough to address the interaction of multiple advice needs and takes a limited view of a client’s solution,” the regulator stated.
Tech to the masses
The revelations from ASIC go against the narrative that digital advice will play a key role in the future of financial advice.
Both the regulator and financial services minister Jane Hume, who also has fintech in her purview, have made it clear they want to explore the ability of all options under the fintech umbrella to take advice to the masses.
It’s also an idea that digital advice providers are backing wholeheartedly. According to Pat Garret, whose Six Park venture offers automated investment advice, resistance to digital advice often stems from advisers seeing it as a competitor instead of a value-add to their existing services.
“We do not claim to be able to address the more complex issues that advisers are best equipped to deal with,” Garrett tells Professional Planner. “The service is additive, not competitive.”
The more innovative advisers understand this dynamic, he says.
“Many advisers now recognise that to future proof their businesses, they need to create different services to efficiently address different clients and their needs.”