Financial advisers have sent the Australian Securities and Investments Commission (ASIC) an unequivocal message that they are unlikely to be providing digital advice services in the future in the context of the regulator’s affordable advice review.
ASIC has told a key Parliamentary Committee that 134 out of 183 respondents to its consultation paper dealing with affordable advice had stated that they did not want to provide digital advice in the future, believing it is best suited to simple advice.
ASIC said the key issues identified by the respondents were the development costs associated with digital advice, a lack of demand and “consumer preference for a human adviser.”
“However, advisers saw a role for digital advice support services (e.g. better document management systems, fact finding, online client interactions and reporting tools),” ASIC told the Parliamentary Joint Committee on Corporations and Financial Services.
“Most considered that digital advice is only suited to simple advice needs and younger people. Respondents also noted that existing technologies often ‘promise a lot’” but in practice do not integrate data well (assessing the interaction between income, tax and Centrelink entitlements for example), and do not allow for adequately tailored advice and strategies,” ASIC said.
The regulator detailed the limitations respondents outlined to the delivery of financial advice as being:
a. Digital advice only commercially feasible ‘at scale’. The cost and scale to provide quality digital advice make it profitable only for larger entities, with the resources and systems in place;
b. Digital advice is only useful for ‘single issue’ advice. Respondents were of the view that human advisers are required for complex advice needs. Many respondents also considered that digital advice is not conducive to building long term relationships with clients; and
c. Some respondents raised a quality concern with digital advice and that clients can receive poor advice if input information is provided incorrectly. Algorithms are not advanced enough to address the interaction of multiple advice needs and takes a limited view of a client’s solution.