In what could be the last-ditch attempt for digital advice to have greater take-up in the Australian market, the Quality of Advice Review will attempt to bridge Australian consumers who are happy to engage with digital interfaces with advisers who don’t have the same confidence to offer digital advice.
Almost a year ago, ASIC published the views it received from advisers on technology where it found widespread reluctance from advisers to embrace digital advice, with lack of customer demand and compliance cited as major issues. While the review may not be able to promote digital advice to consumers, its remit allows it look at the regulatory obstacles keeping advisers away from utilising it.
In an issues paper released on Friday, review lead Michelle Levy noted the obligations which apply to the provision of financial advice are intended to be technology neutral, meaning digital advice currently had no regulatory advantage.
“This principle is reflected in the regulatory framework by imposing the same licensing, conduct and disclosure obligations on providers of advice irrespective of who or what the provider is and the form in which the advice is provided,” the paper stated.
This means a provider of personal advice must act in the best interests of the client, give priority to the client’s interests and not accept conflicted remuneration whether the provider is an individual financial adviser or an algorithm. However, it is noted by the report that professional standards obligations are only imposed on individuals which gave one advantage to digital advice.
The implication of Levy’s views in the paper are that if a digital advice algorithm is shown to have no conflicts, then technological neutrality shouldn’t be an impediment and different regulations for digital advice may be needed.
“[Professional standards] are intended to mitigate the risk of an adviser acting in their own interests when providing personal advice,” the paper stated. “However, it is not clear the same risks are relevant to digital advice.”
Levy has expressed confidence digital advice can boost advice accessibility without watering down professional standards.
Take up of digital advice low
ASIC’s research during its consultation paper (CP 332) ‘Promoting affordable advice to consumers’ response released last July found 148 of 215 respondents didn’t provide digital advice citing lack of demand, consumer preference for human contact and regulatory concerns.
However, the 2021 National Financial Capability Survey from the government found 68 per cent of respondents would prefer to use financial technology over other channels to access financial services.
Financial Services minister Jane Hume, whose portfolio includes oversight of fintech, has been deliberate in her view that digital solutions have its place in the industry.
“Something that hasn’t been well tackled in this space is technology,” she said in January at a Conexus event.
“We know that advent of technology in financial advice is going to be gamechanger and a disrupter, but it’s more than just a replacement mechanism for personal financial advice. We want to better understand how the regulatory setting can be adjusted.”