Digital advice AFSLs should be required to have responsible managers who not only meet financial advice standards but who also have a background in technology, argues goals-based robo-adviser SuperEd.
SuperEd's head of advice and operations, Scott Machin, told ifa his company wrote a submission to an ASIC consultation paper recently, suggesting the regulator consider additional requirements for digital advice licence holders.
Mr Machin argued that because the algorithms used by many robo-tools are complex, providers should have at least one expert in the field as a responsible manager.
"It's difficult for a person whose background has been in financial advice to all of a sudden go, 'I'm going to understand the mathematics and technology behind this algorithm'," he said.
"What we're asking ASIC is to think about responsible managers more broadly than someone who only understands advice."
SuperEd also responded to ASIC's proposal to require independent third-party testing of algorithms, saying it should not be compulsory but rather left up to the licensee to decide. The submission states that many licensees may be concerned about protecting their intellectual property.
"Each digital advice solution is likely to be powered by a different algorithm. Many of these algorithms will have a level of unique intellectual property," SuperEd said.
"Many of the firms who are the natural providers of independent algorithm testing services also provide services in the digital advice market.
"Many digital advice licensees will be reluctant to 'open the bonnet' and allow potential competitors to examine their algorithms," the firm said.
The SuperEd submission calls on ASIC to consider providing guidance on when an SoA is required for robo-advisers. This is because there are many users who are only "playing around" with the advice tool.
"The digital advice licensee providing personal advice has an obligation to provide an SoA to the user when certain criteria are met. However, even if these criteria are met, the licensee may find it difficult to determine when the user has finished 'playing around' and is now ready to purchase the advice," SuperEd said.
"The user experience will be poor if an SoA is automatically produced each time the user ends a session on the chance that that is their final position."
SUBSCRIBE TO THE IFA DAILY BULLETIN
- 19 Feb 2019ASIC to ‘fully implement’ Hayne recommendationsBy James Mitchell
- 19 Feb 2019CFS hamstrung advisers as they left for DoverBy Adrian Flores
- 18 Feb 2019ASIC appeals Westpac best interests court decisionBy Adrian Flores
- 18 Feb 2019FASEA mostly funded by the major banksBy Adrian Flores
- 19 Feb 2019Great advisers are going to thrive: Dow JonesBy Eliot Hastie
- 15 Feb 2019ASIC to undertake harsher penalties against banksBy Eliot Hastie
- view all