The Australian Securities and Investments Commission (ASIC) believes the liability for scaled online financial advice should fall on a financial adviser, but a lack of specific guidelines means some licensees are in the dark on their compliance commitments.
The Association of Superannuation Funds of Australia’s (ASFA’s) submission to ASIC’s consultation paper ‘Additional guidance on how to scale advice’ stated that a lack of specific guidance for online advice will become an issue as the market continues to expand.
"The problem of developing guidelines for scaled advice online is that ASIC can only start looking at the liability surrounding web and phone-based advice when there are enough providers to compare against, and this is starting to happen. It’s hard to give guidance until you start to see failures," said ASFA chief executive Pauline Vamos.
"Online advice is such a new delivery mechanism and the law has generally not kept up with technology."
AdviceConnect chief executive Mike Giles said most clients in the market want lower cost limited advice, but he is seeing a very slow take-up of online and phone-based solutions because large institutions are "dead afraid" of meeting their compliance commitments.
"Online advice is coming, but because ASIC isn’t clear on compliance, we all have to take a baby step and see if someone tries to cut our head off," Giles said.
According to Giles, this uncertainty becomes a real issue because clients today have the ability to choose a number of channels from which to receive limited advice, and especially with proposed Future of Financial Advice (FOFA) legislation, licensees need to add value to the advice they provide.
He said ASIC needs to keep up with the changes because providing scaled advice over the web or on the phone will become a typical part of the advice landscape over the next few years.
A spokesperson from ASIC said the guidelines set out in the Corporations Act 2001 have enough of a general application to cover the provisions of scaled advice delivered online.
Minter Ellison partner Chern Tan said there should be no confusion as to where the accountability lies in providing scaled advice online, referring to Part 7 of the Corporations Act 2001
"You couldn’t say there is a gap in the law relating to online financial advice," Tan said.
"It would still be the adviser who prepared the advice or the licensee," he said.
However, Vamos said the regulator should give licensees a bit of slack because financial advisers may find difficulty in upholding their compliance obligations, which she said are still murky when it comes to liability.
"I can understand any adviser being wary about building a system that they may need to change," Vamos said.
According to ASFA’s FOFA submission, the association supports the delivery of scaled advice online and over the phone, and the adviser should bear the onus of the advice provided.
