Digital advice central to quality of financial advice review
If a serious step change is to be made towards achieving the Quality of Advice Review’s (QoA) proposed goal of high-quality affordable advice, the adoption of digital advice technologies is key, according to Ignition Advice.
The 2022 Quality of Financial Advice Review draft terms of reference mentioned it would pay particular attention to how technology and digital advice might enable mass market adoption of low-cost advice, particularly for young consumers and those with low asset values.
Andrew Baker, Ignition senior adviser, said this conclusion had been obvious to many in Australia’s financial services industry but had been held back by limited product offerings.
“However, what seemed blue sky even five years ago, is now in production,” he said.
“Ignition Advice, for example, is live with multiple clients in Europe, providing adviser-supported, direct-to-customer, and hybrid advice models across the key topics of retirement, investment and insurance.”
Baker said the UK and Irish wealth industry was rapidly embracing hybrid digital advice as a means of addressing the advice gap, finding new sources of growth and responding to regulatory requirements.
“By comparison, the Australian industry has been slower to move,” Baker said.
“Many institutions have had other priorities in recent years or have not seen themselves as being in the business of advice provision.
“Some have been scarred by the Royal Commission experience or remain wary of the subsequent regulatory uncertainty such as the Westpac general advice case.”
He said while digital advice could already be embraced in a fully-compliant manner, it was likely that the QoA Review would further ease concerns about risk and compliance in relation to digital advice.
Baker said it was Ignition’s view the QoA review would have a critical input into a successful Retirement Income Covenant (RIC) and as a pre-requisite for the guidance of the RIC as:
- The Treasury’s RIC 2021 Position Paper contemplated super funds developing complex new retirement income products (e.g. pooled longevity products) and offering appropriate guidance to fund members about retirement income (ranging from information to personal advice) to help them make decisions.
- Submissions to the RIC consultation process have highlighted the difficulty of doing so via the current scope of general or intra-fund advice, given the complexity of retirement income issues and their dependence on individual circumstances, and have suggested bringing the RIC and QoA review into alignment.
“Ignition’s perspective is that the outcomes of the QoA Review will be necessary to making the RIC a reality at scale. Without it, there is a distinct risk that newly-developed sophisticated retirement income products will sit on the shelf, largely unused for lack of suitable advice,” Baker said.
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