Robo-advice as conflicted as vertical integration: AIOFP

Attempts to introduce robo-advice into the Australian market have overlooked the fact that has not worked anywhere else in the world, according to the Association of Independently Owned Financial Professionals (AIOFP).

Peter Johnston, AIOFP executive director, said the introduction of robo-advice compared to the vertical integration model introduced by the banks.

“The greatest industry conflict over the past 30 years has been when the banks introduced the profoundly conflicted vertical integration advice model, this is a very similar concept without the human content,” Johnston said.

Related News:

“It just another ‘sneaky’ strategy to only offer an in-house product to already existing clients regardless of their quality.

“It is about time academics and bureaucrats, who live in a different world to most and never given advice or seen a consumer are removed from the industry debate.”

Johnston said politicians, the Australian Securities and Investments Commissions, and consumer groups failed to recognise the advice community did not want “bad eggs” in the industry.

“This failure has resulted in inexperienced humans making naive decisions resulting in massive red tape strangulation, duplication and ridiculous uncommercial conditions that ironically consumers are indirectly paying for,” Johnston said.

“There is a minor place for robo-advice going forward in conjunction with human advisers to assist when things go wrong with markets and/or products.

“The last thing we want are a bunch of academics trying to develop a conflicted product to ‘clip’ the ticket on industry revenue.”

Recommended for you




You're spot on Peter, I think in many ways it's even worse. With Roboadvice these organisations can now hide behind the "general advice" mantra. No consumer protection, no PI, no pesky advisers asking difficult questions. Is this the world Haine and the FPA wanted? Well....they got it.

But Ms Minister for Robo Advice Hume thinks it’s a wonderful plan to regulate to death Real Advisers so the big banks can take over with Robo Sales.
Mr I Love Banks Frydenberg will ensure it happens.
Out with Frydenscum
Out with Hume
Out with Ms Press

Bang on. Academics, theoreticians, politicians should just piss off and institute a proper professional standards board, not an ASIC proxy kangaroo court that we are being lumbered with.

I’ve never understood how robo won’t suffer the same issues of vertical integration. The single biggest issue for over 20 years yet none of the theoreticians, including doddery old Haine, ever figured this out. Well done fellas, the bunch of imbeciles you are.

Good luck to any Aussie who is not loaded getting quality advice anytime soon.

And which politician will be checking the software algorithms, to ensure they aren't favouring one product over another? Yet another disaster in the making....

The Clive Palmer of Financial Advice is on fire right now.

I feel we're all sick to death of being pushed around by detached and sometimes officious bureaucrats, academics and consumer advocates who expect the highest standards of education, obligation and compliance demonstration from face to face advisers.

Oh yeah... just as a reminder - how many Ph.D's and Nobel Prizes in Economics were involved in the Long-Term Capital Management calamity? Remember that?

Where are the considerations to equity when you have one set of rules for human advisers and a completely different set of rules for a computer program?

At the end of the day, a human sits at the end somewhere. That human is either the adviser or the software developer.

No matter what the format of advice, there is always a temptation whereby an adviser or software developer may seek to benefit from incorrect prioritisation of client and agency interests.

So why is it that we expect that a software solution would be any different? Why would we reduce the obligation on a software approach?

It doesn't make the temptation go away, it just introduces a different format in which the temptation can be manifested.

If anything, if the software when applied is used with scale then this could be even worse than any vertical integration issues previously seen.

The hypocrisy from what I've been reading recently is staggering.

Add new comment