Moving away from a regulatory regime that focuses less on process and more or outcome will be essential for the acceleration of digital take-up according to Quality of Advice Review lead Michelle Levy.
Speaking on a webinar hosted by Professional Planner in partnership with AMP, Levy said although the proposals did not discuss digital advice it has been a topic she has kept in mind.
“[Digital advice] is another reason why it’s actually important to move away from process-based duties – the Best Interest Duty, disclosure [and] conduct obligations – to a ‘content of advice’ obligation. When you are dealing with an algorithm it’s hard to regulate its conduct [or] impose a best interest duty; it’s meaningless on an algorithm.”
Levy said one of her team members has been tasked on studying self-driving vehicles and how the laws of negligence are applied.
“How do you have a duty of care when it’s not a person? Digital advice is the same; you have to look at the outcome.”
Research conducted by ASIC last year found little acceptance of digital advice by advisers, however it is expected the larger institutions will look to leverage the space. Likewise, data from overseas suggests clients are significantly more loyal to human advisers.
The Coalition has supported the proliferation of digital advice, former financial services minister Jane Hume said it could be “gamechanger and a disrupter” while her replacement as shadow minister Stuart Robert said “algorithms are difficult to question”.
Insignia announced a partnership with a digital advice firm in August, although it would not offer product advice.
Levy said there is a key difference between human and digital advice, which the former having a level of trust and relationship which does not exist with the latter, and this is reflected in the law currently.
“We don’t need special laws. There is one slight difference here and that is the relevant provider point. If you were to pay for digital advice, your digital advice provider would not have a best interest duty.”
Levy said the creator of the algorithm will be the same as any product issuer giving advice under her proposed regime.
“[It] will need to think what is it that I need to ask along the way in order to be satisfied this is good advice.”