Digital advice adoption will take time

Digital advice might not yet be backed by most financial advisers, but digital advice technology providers say it is still in the early days of how it should be adopted. 

The Australian Securities and Investments Commission (ASIC) had told Parliamentary Committee that 134 out of 183 respondents in its affordable advice consultation paper said they did not want to provide digital advice. 

Mike Giles, Ignition Advice chief technology officer, said the industry was still at the beginning of the world of digital advice. 

“We know from what we see overseas is that simpler advice tools and a model where the advisers can assist as opposed to lead is the right way for dealing with that broader market,” Giles said. 

“They’re still fairly entrenched in that adviser-led model and not really thinking about how they might move into these hybrid models and that’s what the technology will bring eventually.” 

However, Giles said the comments from ASIC were understandable as advice was being viewed through the commercial lens of an adviser practice that only knew how to monetise comprehensive advice services to the “top end” of the market. 

“But what jumps out to me is the implication that simple advice is no good,” Giles said. 

“Because when we’re talking about retail and everyday customers that still need advice and guidance is that their financial needs are simpler. I think they’ve taken an adviser-centric lens to it, as opposed to a customer one. 

“But everyday people do have simpler advice requirements which is why you see it being provided by the larger institutions who have to get advice and guidance out into the retail space.” 

Ivon Gower, Midwinter Financial Services head of product, said the standard advice client would currently not get the same experience through digital advice as they would through an adviser.  

“However, those who are unable to access advice because of cost are generally not the same clients,” Gower said. 

“People who are currently priced out of advice are possibly looking for simple advice or for an entry option into an advice relationship. 

“For these people, sacrificing some of the personal interaction to get advice can put them on a path where they are in a stronger financial position and have a better insight as to how advice can benefit them, and build a personal relationship in the future.” 

Gower said the firm’s industry super fund clients, which included REST, had indicated there was a large market for digital advice. 

“This leverages intrafund advice concessions but with clarification of regulation – the same could be applied to strategic (non-product) advice for consumers,” Gower said. 

“Removing the product advice has the potential to significantly reduce the time to provide advice, potentially establishing a lower cost introduction to some clients with simpler needs.” 

Peter Panigiris, Midwinter business development manager, said digital advice was not a substitute for a human financial adviser, particularly for more complex scenarios. 

“However, as an entry into the advice landscape and self-serve capability for simple or single-issue scenarios, digital advice tools can offer a lot of benefits for advisers and their clients,” Panigiris said. 

“Development costs for digital advice solutions need to be absorbed by technology providers so they are spread across multiple advice practices who pay for access to the technology, and not its development. 

“If this technology is only available to large entities, smaller advice practices may be at a disadvantage as they will not have access to the efficiency and scalability benefits that can be gained by adopting digital advice in their practice.” 

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"Gower said the firm’s industry super fund clients, which included REST, had indicated there was a large market for digital advice. "

Of course there is a large market for it from union funds. "Digital advice" is not advice. It is electronic product flogging. It's perfect for conflicted product companies that operate with regulatory immunity, like union funds.

Here comes MIA Jane Hume, ASIC and Industry Super to the party all promoting more Intra Fund Advice, All paid for via Hidden Commissions, by tied sales Agents, flogging 1 product, no SoAs, no BID, no FARSEA, no real AFSL compliance.
Pure product flog now call Advice, Robo Advice. ASIC stitch up yet again against real Advisers.

Even the simplest of advices can be implemented incorrectly at great cost. That's why an adviser centric lens is applied and valuable and can't be replaced. A top up super contribution where the client doesn't complete his intention to claim is an example that a digital advice engine will recommend but not ensure it is done correctly. The best way is for these IT providers to come up with products that can be embedded in adviser businesses and then they will both flourish. If they want to go to the mass market direct, good luck because it is not scalable in Australia, and if it is, it will be done by large players like a Vanguard or other internationals - but they haven't come here yet, because the regulations are too complex and the market too small to make it viable. my 2 bobs.

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