Digital tools to offer pathway to simple advice: Levy
Michelle Levy is expecting to see a rise in digital tools as she believes it is unnecessary for all advice to be provided to consumers by a financial adviser.
Speaking at the FPA Professional Congress in Sydney, Michelle Levy, lead of the Quality of Advice (QOA) Review, noted the growing use of digital tools like robo-advice within the financial planning space.
She was interviewed by FPA chief executive, Sarah Abood, on the terms of reference for the review that were released back in March 2022.
“There are 16,000 [financial advisers and planners in Australia] and we hope with the benefit of these recommendations that there will be more. But there will never be enough to provide the advice that people need on a day-to-day basis,” Levy noted.
“I don't think that all advice requires a professional. A really important part of the proposal is that the obligation, when it's not with a professional adviser, will sit with the licensee. And I suspect digital advice and robo-advice and technology will be of enormous assistance here.”
This aspect of allowing large financial institutions, superannuation funds, insurers and other such bodies to provide personal advice has “proved contentious” among FPA members, Abood pointed out.
According to Levy, this would not operate as a replacement for advisers but could offer a pathway for simple advice.
She added: “I think we will have more people giving advice with the assistance of digital tools. In the case of, say, an insurance company, they would only be happy to give extremely limited and narrow advice without having a financial adviser.
“The more discretion and judgement you need, the less you can rely on a script, in which case you need a human. And when you need a human, you need to say ‘how much expertise does this person need in order to give that advice?’ and that’s where you start to bring in a financial adviser.”
There had been a strong groundswell of support towards regulation in this space, she said, that was consistent with the professionalisation of the sector.
“Advice has to be fit for purpose. Is [the financial institution] telling me the right thing? Is this really the right amount of cover for me? If yes, in my view, that is good quality advice.
“It is possible that if I'd gone to a financial adviser, or an insurance broker, they would go to the market and they would find the best policy for me on all my criteria. But that doesn't mean that the initial advice in those circumstances was not good advice,” Levy explained.
The final proposal was to be provided to the Government by 16 December.
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Rhea Nath
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I feel like I've been in a coma for the last 5 years, woken up and nothing has changed. Our professional bodies still encourage us to embrace changes that are bad for consumers and bad for us, the Government has another enquiry into financial advice, the minister in charge is a space cadet, fintech is seen as the cure all and the product suppliers are working on how to get around us and straight to our clients. I'm going back to bed.
Why is it always a lawyer telling us what our industry/profession needs and how to do it? They don't listen to those on the ground and they make recommendations that they would never in a million years make for their own profession which is rife with it's own issues and problems.
Michelle should just have stayed mum until she got all her ducks in a row.
“I don't think that all advice requires a professional. A really important part of the proposal is that the obligation, when it's not with a professional adviser, will sit with the licensee."
Excuse me! What does this mean? A licensee is some-one or some organisation authorised to give financial advice. If you are a licensee authorising professional advisers to work under your licence, then who has the obligation?? And how do you define professional advisers in the first place? The ones who earn an income from being more financially literate than their clients?
Or are you saying that licensees will not appoint professional advisers as AR's?
What's the point of being a licensee? Being able to use unprofessional advisers to give advice?
And what on earth happened to the concept that you can't call yourself a financial adviser unless you are operating under an Australian Financial Services Licence??
Surely you don't mean that just anyone can hang out a shingle and call themselves a financial adviser again?
And “Advice has to be fit for purpose. Is [the financial institution] telling me the right thing? Is this really the right amount of cover for me? If yes, in my view, that is good quality advice."
Why do you suppose financial advice consumers come to professionals in the first place? To find out whether the product provider is telling them the right thing! Or is giving them the right amount of cover.
And don't even get me started on the financial institutions who refuse to pay up when claims are made. Consumers can absolutely NOT rely on the product provider in that scenario.
Where are your wits Michelle?
And here's one for the older advisers. Do you recall back in the 90's when ASIC defined good advice as being compliant advice? I don't imagine they have changed their tune one iota. Compliant advice can be totally bad advice, and that's been the problem of the past two decades.
The next two decades are shaping up to be even worse.
And another thing... how do you know the cover you are buying for the right amount actually provides the right kind of cover for you? Consumers who are not financially literate are under the handicap of not knowing how to read and interpret the find print. That's what I as a professional adviser, not working for the product provider, am here for.
Ms Levy, congratulations for laying the foundations for the next RC into dodgy, product flogging focused Institutional so called Advice.
Ms Levy, selling a product is not Advice.
These Institutions, Banks, Super Funds and Insurance Co.'s will be flogging products, only their own products and it won't be Advice, it will be Product Sales and Product Information - PLEASE STOP CALLING THIS RUBBISH ADVICE !!!!!!!!!!!!!!!
There is absolutely a requirement for these services. If an investor receives good and proper asset allocation, broad based index exposure (as opposed to concentrated and speculative or ill informed punts on crypto or weak companies) and that service is cost effective, well that’s a good thing. I have had many conversations with those in the “advice gap” who have no idea where to turn and were seriously considering putting everything into bitcoin, or concentrate their exposure towards a few names that pay good dividends. This is a service that is needed but it comes down to the execution. A hybrid model using a bank or insurer or large wealth manager (AMP for example), acting as the intermediary is much needed.
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