Is excessive regulation stemming advice innovation?
Global asset manager Vanguard has indicated Australia is lagging the world by lacking a category of ‘personalised guidance’ to allow consumers to make their own informed decisions.
In a Quality of Advice Review submission, the firm, which had $11 trillion in assets under management and 30 million clients, said consumers should have a means to make informed decisions based on objective information.
Its research had found there was an enduring preference for human advice over digital and that clients believed advice provided higher investment returns than without advice.
As a result, a ‘sliding scale’ should be implemented from unregulated information to lightly-regulated personalised guidance to limited advice through to comprehensive advice.
“[Personalised guidance] is a category of customer engagement by product issuers and digital platform providers that is intended to help current and prospective customers in their decision-making process under an educational style self-directed model of providing guidance, including nudges and ‘next best actions’ but not expert advice recommendations under a fiduciary relationship.
“The introduction of this legal category of ‘personalised guidance’ that is not regulated as advice will also foster and facilitate the development of digital platforms and ecosystems. These digital offerings are flourishing in the US, UK, Europe and Asia but are not evident in the Australian market beyond simple product portals and embedded finance applications.
“Seen as an integral part of the future of banking and wealth management globally, the introduction of these platform offerings in Australia is hampered by the concern that the personalised nature of customer engagement will cross the line into ‘personal advice’ because of the restrictive nature of Australian financial product advice definitions.”
The asset manager said it was already using data analytics to create a personalised experience for its customers who held a defined contribution pension in the US.
Personalised guidance would be subject to disclosure and product issuer conduct obligations.
“Our recommended changes to the Australian financial product advice laws are intended to better balance the desired outcomes of the regime to provide greater access to Australian clients to helpful guidance and quality advice at an affordable cost that is better suited to meet their needs, preferences and circumstances.”
AUTHOR
Laura Dew
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