The jury is out on advice fintech

Financial advisers around the country are in dispute as to whether financial technology could help to reduce the cost of providing advice, arguing the best it can do is ease a complicated process.

In individual submissions to the Quality of Advice Review Issues Paper, many financial advisers detailed their response to the question of whether fintech could reduce the cost of providing advice and whether there was a material benefit to advisers and consumers.

Michael Baragwanath, a principal adviser from South Australia, firmly denied fintech was the solution to the advice gap, saying if the market could made sense of the current nightmare and opted to digitise the solution, the major banks and wealth companies would have already done so.

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“Many have spent HUNDREDS OF MILLIONS OF DOLLARS and have utterly failed.

“The question set presented focuses on fintech or financial technology platforms to solve problems and create efficiency. This is not a practical framework for thought. Unless the Government proposes to deliver a fintech platform or create more efficient wholesale data access channels, the discussion is a waste of time.”

Several respondents stated the level of regulation made firms nervous about using technology to meet requirements and questioned if other professions would be asked to rely on technology.

Western Australia-based adviser, Ray Ong, said: “Financial planning is a highly nuanced profession that requires intellect (technical knowledge), emotional intelligence, investment experience, business development skills and business administration. Fintech can help, but it also comes at a significant cost. Fintech should not be the solution to the problem caused by the regulations. Can fintech significantly replace a psychiatrist?”

Steve Melling, an adviser in Melbourne, commented: “Technology does tend to improve efficiency. However, it would seem that the primary impediment is over-regulation, not lack of technology.

“The impediments apply to all licensees – technology solutions are doing their best to work within these constraints.”

However, Michael Rice, founder of financial services consultants, Rice Warner, said all forms of simple advice, as defined in this submission, could be provided using technology.

“The advice could be structured via online questions and tools either as a complete kit, or as an aid for an adviser. In both cases, the costs of providing the advice would be much lower than is the case today,” he said.

“[But] the fact that advisers make limited use of fintech solutions shows that the current law is a barrier. Clearly, advisers would benefit from technology, but the compliance risks are too high.”

As for whether financial advisers and consumers benefitted from advisers using fintech solutions to assist with compliance rather than for providing advice, Baragwanath said: “Unless the Government proposes to provide a fintech solution, I fail to see the benefit of this question”.

Ong disagreed that advisers and consumers benefitted from advisers using fintech for compliance purposes, stating the best it could do was help an extremely complicated process.

“If the process can be less complicated without compromising outcomes, there is an immediate benefit.”

These submissions to the Review were made on an individual basis rather than as representatives of their firms.

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How loud do we need to shout for this to be heard. FINTECH IS NOT THE SOLUTION. The issue of cost, complexity and access to advice is due to the massive level of regulation which provides no value to clients, in fact it costs them money and denies them access. Every time another layer of regulation was created there was no serious effort to engage with clients or advisers. Guess what it didn't work. So this time lets stop listening to bodies who have little skin in the game or are attempting to push their own agendas and listen to clients and advisers. The only people who think fintech will fix anything is the fintech companies trying to flog their products.

Properly applied, fintech does have potential benefits. But the Hume agenda was to promote fintech as an alternative to fixing the bad regulation which prevents consumers accessing professional advice, and as an opportunity for product companies to sell poor quality products direct to consumers. The fintech questions in QAR were designed to gather "evidence" for that anti consumer agenda. It is the same approach used by O'Dwyer in commissioning the Trowbridge report to gather "evidence" supporting a regulatory driven shift from professional insurance advice to direct selling of junk insurance.

Jones needs to take control of the QAR to make sure it is not misused against consumers in the way Hume intended. Fixing the bad regulation of professional advice must be the one and only priority. The potential positive applications of fintech can only be assessed once the bad regulation of advice is fixed.

If the mad, costly utter BS Gordian Knot of Australian Advice could be solved by Robo Advice it would have been done.
It’s impossible to do via Robo Advice, would
take so much time, data input and crazy questions that no consumer would make it through.
It’s a mythical pipe dream in Australia.
And even if it was possible, where in the world is Robo Advice / Sales successful for clients and providers ??? Where ????

Eliminate the AFSL / Licensee middlemen.. the fat cats that charge what they want and deliver zero for it.. it’s the biggest rort going around..

Hi everyone and thanks MoneyManagement for taking the time to read my rather long submission. Just some additional context regarding the futility of fintech when it comes to personal advice:
It's not for want of trying. I've built my own software (referral management and "financial health check" platform), I've been an early adopter of just about every option that has appeared, and I helped one of the CRM/Software providers build a "digital advice" solution that many industry funds use on their websites.
So just in case, someone thinks I'm a Luddite with a paper diary and a notepad, I've been at or near the forefront of fintech for years. It's not that fintech is bad, the problem is that you can't cross a canyon with a ladder.

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