Financial advisers around the country are in dispute as to whether financial technology could help to reduce the cost of providing advice, arguing the best it can do is ease a complicated process.
In individual submissions to the Quality of Advice Review Issues Paper, many financial advisers detailed their response to the question of whether fintech could reduce the cost of providing advice and whether there was a material benefit to advisers and consumers.
Michael Baragwanath, a principal adviser from South Australia, firmly denied fintech was the solution to the advice gap, saying if the market could made sense of the current nightmare and opted to digitise the solution, the major banks and wealth companies would have already done so.
“Many have spent HUNDREDS OF MILLIONS OF DOLLARS and have utterly failed.
“The question set presented focuses on fintech or financial technology platforms to solve problems and create efficiency. This is not a practical framework for thought. Unless the Government proposes to deliver a fintech platform or create more efficient wholesale data access channels, the discussion is a waste of time.”
Several respondents stated the level of regulation made firms nervous about using technology to meet requirements and questioned if other professions would be asked to rely on technology.
Western Australia-based adviser, Ray Ong, said: “Financial planning is a highly nuanced profession that requires intellect (technical knowledge), emotional intelligence, investment experience, business development skills and business administration. Fintech can help, but it also comes at a significant cost. Fintech should not be the solution to the problem caused by the regulations. Can fintech significantly replace a psychiatrist?”
Steve Melling, an adviser in Melbourne, commented: “Technology does tend to improve efficiency. However, it would seem that the primary impediment is over-regulation, not lack of technology.
“The impediments apply to all licensees – technology solutions are doing their best to work within these constraints.”
However, Michael Rice, founder of financial services consultants, Rice Warner, said all forms of simple advice, as defined in this submission, could be provided using technology.
“The advice could be structured via online questions and tools either as a complete kit, or as an aid for an adviser. In both cases, the costs of providing the advice would be much lower than is the case today,” he said.
“[But] the fact that advisers make limited use of fintech solutions shows that the current law is a barrier. Clearly, advisers would benefit from technology, but the compliance risks are too high.”
As for whether financial advisers and consumers benefitted from advisers using fintech solutions to assist with compliance rather than for providing advice, Baragwanath said: “Unless the Government proposes to provide a fintech solution, I fail to see the benefit of this question”.
Ong disagreed that advisers and consumers benefitted from advisers using fintech for compliance purposes, stating the best it could do was help an extremely complicated process.
“If the process can be less complicated without compromising outcomes, there is an immediate benefit.”
These submissions to the Review were made on an individual basis rather than as representatives of their firms.
