Levy 'convinced' digital advice can solve accessibility issue
With more financial advisers exiting and rising costs creating greater inaccessibility, Michelle Levy recommends digital advice as a tool to improve access and efficiency.
In Chapter 10 of the Quality of Advice Review final report, Levy discussed the ways in which digital advice could mitigate the effects of a shrinking industry.
“I am convinced that digital advice tools can make good quality financial advice widely available,” she said.
The 267-page report stated there would be no need for regulation specific to digital advice, as existing recommendations would allow for the easier provision of digital advice.
Consultation
The report recognised the limited supply of scaled and incidental financial advice, alongside concerns of expensive costs, had led to advice being out of reach for many everyday Australians.
“Technology and digital advice tools have the potential to improve access to quality advice across the spectrum of financial advice for those who want and need it,” Levy added.
Through the process of writing the QOA, Levy was asked to examine various forms of financial calculators and digital advice tools which gave users personal recommendations.
“Overwhelmingly they have been really helpful,” she commented regarding these sites, but identified that they had not been made available to consumers due to the regulatory regime.
Levy recognised the benefits of free online advice tools, such as the ASIC MoneySmart website and super funds’ financial calculators. Additionally, the increasing number of advisers creating apps and client portals to support greater efficiency were all forms of digital advice, according to Levy.
The report included recent survey results, where 85% of respondents ‘agreed’ or ‘strongly agreed’ that utilising financial technology would save them time.
Barriers and impediments
“Despite all of this promise, the adoption of digital advice tools in Australia has been slow,” Levy explained.
This was due to two reasons:
- Advisers have been “reluctant to commit the time, capital and resources to set up digital advice systems while the rate of regulatory reform continues to be so high”; and
- Regulatory complexity, which remained the same as 20 years ago, caused advisers to view the obligations surrounding personal advice as “not only difficult but uncertain”.
Implementation
“The Corporations Act does not treat the provision of digital advice differently from other financial advice and there is no reason for it to do so if the recommendations in this Report are adopted,” Levy continued.
She urged that regulation must not assume a person always provided advice, as it was “less and less likely that advice will be provided by an individual and more and more likely that advice will be provided by a digital advice tool”.
Human advisers would likely hold the role as intermediaries between computer algorithms providing advice and the customer.
Financial technology would not only increase accessibility, according to Levy, but also improve the quality of advice provided due to less room for error and less room for the provider to improvise.
Levy concluded that no further changes would be needed: “I am satisfied that the recommendations in this Report will assist existing providers – financial institutions and financial advisers – to provide more digital advice tools to their customers and clients. In many cases they will do so at no additional cost.
“I am also satisfied that they will help existing and new providers of digital advice tools to offer new digital advice services to consumers. To quote the Terms of Reference, they promise to ‘enable mass market adoption of low cost advice’”.
AUTHOR
Jasmine Siljic
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Maybe she should have read and understood FASEA Standard 6...
Digital advice CANNOT meet this standard and therefore CANNOT be said to be in the best interests of the client...