Compliance burden a myth to digital advice take-up

The corporate regulator is not supportive of digital advice, institutions cannot recommend their own products and it does not meet best interest duty (BID) – these are three myths about digital advice dispelled in a whitepaper.

Ignition Advice’s ‘Compliance myths about digital advice’ whitepaper highlighted those three myths about the take-up of digital advice:

  • Myth one: The Australian Securities and Investments Commission (ASIC) is not supportive of digital financial advice solutions;
  • Myth two: Institutions are not able to compliantly recommend their own products to their customers; and
  • Myth three: How does digital advice meet BID obligations?

On myth one, Craig Keary, Ignition Advice Asia Pacific chief executive, said scaled advice was permitted by ASIC and permitted in law.

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“We know the unmet advice needs in the community is huge, we also know that unmet advice needs have accelerated as a result of COVID-19,” Keary told Money Management.

“From our perspective, this makes that advice need that is currently being unmet more affordable and accessible.”

On myth two, the Royal Commission’s spotlight on vertical integration meant institutions recommending their products to their customers had been seen as a “no-go” or done with great caution.

“Institutions can confidently deliver single-issue personal advice on their own products,” Keary said.

“ASIC has issued guidance with respect to that, [but] the scope of that advice must be understood and agreed.”

On myth three, the report said digital advice had evolved to satisfy BID, as unlike robo-advice, digital advice was not limited to investments and used fact-find and algorithm calculations for its advice.

“There’s nothing with robo-advice, but it’s something that’s completely automated where it can basically recommend and investment decision for an individual.

“Digital advice is a hybrid solution that allows you to have a human involved in that… Algorithms have now evolved to provide that consistent strategic and compliance advice.”

The whitepaper comes as the minister for financial services, superannuation and the digital economy, Senator Jane Hume, said robo-advice should “excite” advisers as it could enhance their capabilities.

Keary said digital advice would meet the unmet advice needs by making advice more accessible and affordable, particularly for single issue/single goal advice.

“What we do know is consumers are looking for single goal advice; there absolutely is a place for holistic advice and financial advisers do a wonderful job in that space,” Keary said.

“There is a percentage of the consumer cohort where there’s been a life event and how they can get some advice around that single goal.”

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