Speaking at the Adviser Innovation Summit last week, the lead of the Quality of Advice Review (QAR) Michelle Levy said it was “absolutely” her intention to encourage more product providers to consider digital advice options.
“This has always been around and has been around in a much less sophisticated way, and so what I’m trying to do in my recommendations is to allow digital advice to really thrive and to do much more,” Ms Levy said.
Ms Levy reiterated her previous statement, emphasising that her recommendation to enable superannuation funds to expand their advisory role did not envision such advice being provided by call centre operators. Instead, she sees this advice being powered largely by digital advice programs.
Ms Levy explained that her basic proposition is to see that more advice is treated as personal advice, which entails adjusting the current laws governing the provision of financial advice to enable a wider spectrum of methods for delivering such advice.
“If there is a really broad spectrum of financial advice, we need a regime that can adjust itself to the nature of the advice that is being given. You also have to be realistic about who can give that advice and it can’t be the 16,000 advisers. We’d love for these recommendations to increase the number of people coming into the profession of being a financial adviser, but the needs of all Australians can’t be met by individual financial advisers,” Ms Levy said.
“So, then you think about how do we make sure that advice is given that is good and sound and in the interests of consumers, we do that through digital advice programs which have a good audit trail.”
She assessed that digital advice would be a “much safer” way to deliver advice to consumers. According to Ms Levy, this method would enhance the security for both the super fund and its members, as opposed to relying on call centre operators for disseminating advice.
“Again, I suspect none of you [advisers] want to be a call centre operator. So, it’s not realistic, we need an alternative. My recommendation, using the super fund example, the superannuation fund has an obligation when they’re speaking to their members to give personal advice, not general, and to give good advice, not the call centre operator because that’s unfair to make the person on the other end of the phone who is not a professional be responsible for that advice,” Ms Levy explained.
“When they say, the institution, the trustee of the super fund, ‘How do I do that safely in a way that I am confident that my members are getting good advice?’, and they do that using digital advice programs.”
Joining Ms Levy on a panel at the summit, moneyGPS chief executive officer and co-founder, George Haramis explained that digital providers are being approached by super funds that are looking to deploy these digital tools for advice-giving purposes. He revealed that super funds are in the process of figuring out how to advise in a way that is safe for them to do so.
“The super funds, from where we sit, are looking at different alternatives. I think they are trying to work out where they want to be in this scenario as well. But their biggest challenge, the thing they are worried about is the risk of giving advice,” Mr Haramis said.
“Engaging a digital advice provider, just like you would any type of financial adviser within a fund, is all about risk mitigation.”
Highlighting a surge of activity in the space, Mr Haramis said that superannuation funds are expecting the minister to rule in their favour.
He also noted that digital advice can deliver advice in a compliant way and had it been embraced earlier, it could have prevented many mishaps.
“Digital advice would have saved a number of institutions millions of dollars in fines for delivering advice to people who are deceased,” he said.
Ms Levy, too, expects that given the minister has chosen a private ASFA event to deliver his QAR verdict, super funds could be the main benefactor. She underlined that this was not her intention.
Ms Levy’s recommendation was for other product providers, including banks, to re-enter advice in that limited capacity using digital tools.
Adding that advisers should not be worried, Ms Levy admitted that she is not sure how the minister has interpreted her recommendations and what areas, if any, he is going to heed.
“I am very nervous about what’s coming,” Ms Levy said.
Also speaking at the Adviser Innovation Summit, the chief executive officer of the Financial Advice Association Australia (FAAA), Sarah Abood, similarly said that digital advice is likely to form the foundation for the information provided by product providers.
Acknowledging the fear that product issuers might resort to recruiting backpackers in their call centres, Ms Abood emphasised that product providers are already quite heavily invested in digital. She, however, raised an interesting dilemma regarding the likelihood that eventually, fund members will want to move beyond digital and interact with a human adviser.
“With super funds, they already are investing. Many of them are investing in tools to make it easier for advisers to deal with them and advise clients who are in those funds, which is great. But the biggest problem that most of the super funds have is engagement, particularly with their younger members,” Ms Abood said.
While she believes digital will help, “it’s certainly not the whole problem”.
Namely, Ms Abood believes that money needs to be invested in ensuring members have access to qualified human advisers, and cautioned against separate product issuers creating closed ecosystems that hinder the provision of sound advice.
“Now, as I’ve said before, we need to recognise that human beings, by and large, want to talk to other human beings at some point. So those tools, I think, and I hope, that they’ll be invested in to make the data that we know about the member a hell of a lot easier to access and use, but that they also recognise that there comes a point in everybody’s career and life when they need to have a conversation with a qualified individual. And that’s where I would like to see the money be invested,” Ms Abood said.
“I think it would be a huge positive for us if that’s where the dollars go. What we don’t want is all these separate product issuers creating their separate tools and building their own separate closed ecosystems of data that you can’t access or use if you’re outside of that ecosystem. Not only will that not enable even good advice, let alone best interest advice, but it makes it almost impossible for advisers to advise their clients who are in those products.”
As such she said, an “open architecture” concept is crucial.
“It would help consumers, it would help us, and I believe the product issuers as well.”
Financial Services Minister Stephen Jones is expected to deliver the government’s QAR response at a private ASFA event on Tuesday.
