Can the regulators keep up with the rise of online financial advice?

The advent of intra-fund advice has given rise to online advice platforms with point-and-click delivery, writes Mike Taylor. But will the regulators be able to keep up with the technology?

Just as the advance of technology and the development of the Internet has frequently outpaced the efforts of communications and legal regulators, it is arguable that the so-called industrialisation of advice has outpaced the knowledge and efforts of financial services regulators.

It is now more than a year since the Federal Government gave its imprimatur to intra-fund advice underpinned by the regulatory dispensation which allowed superannuation fund trustees to play to a different set of rules to those imposed on financial planners.

However, it is hard to imagine that either the Minister for Financial Services, Chris Bowen, or the Australian Securities and Investments Commission (ASIC) could have fully comprehended what has followed.

Directly or indirectly, the advent of intra-fund advice has given rise to the development of online advice platforms that allow superannuation fund members and the general public to participate in what amounts to the point-and-click delivery of their advice needs.

These point-and-click advice platforms can deliver super fund members a reasonable appreciation of their relative position with respect to their current and future balances and can go so far as delivering options covering salary sacrifice, insurance and investment style.

Recognising a ripe commercial opportunity, the developers, backers and spruikers of these point-and-click platforms are now seeking to roll them out to a wide cross-section of the industry with the promise that they fall within the necessary regulatory requirements. And perhaps they do.

But the question the Government, ASIC and, to some degree, the Australian Prudential Regulation Authority should be asking themselves is whether they are sufficiently familiar with the platforms that are being rolled out and whether they are fully familiar with the potential consequences.

In circumstances where superannuation fund members are being encouraged into a point-and-click approach, can the Government be satisfied that the platforms delivering the service cannot result in consumers being inadvertently disadvantaged?

Perhaps more importantly, to whom can a superannuation fund member complain if things go wrong? And who will be held responsible? Will it be the superannuation fund trustee who authorised the uploading of the platform, or will it be the platform developer and spruiker?

There can be absolutely no question about the capacity of these point-and-click platforms to deliver particular types of advice quickly and easily, but are they being sufficiently monitored by the regulators to ensure they comply with the regulatory limitations? Indeed, do the regulators even understand how they work?

Not every Australian needs the services of a financial planner.

Research has clearly shown that a large proportion of consumers need only simple, one-off advice. So-called ‘industrialised’ advice may represent part of the answer, but it might also represent a looming regulatory nightmare if it is not appropriately scrutinised, understood and monitored.