Financial advisers have not adopted digital advice models due to misconceptions robo-advice does not meet best interest requirements and may run foul of advice regulations, according to a digital advice service provider.
Six Park made the claim as part of a white paper, titled “Is it red tape or is it me?”, in which it stated Australian financial advisers lagged their international counterparts in adopting digital advice, or robo-advice, solutions.
“Despite the growing success of digital advice overseas, Australian financial advisers have remained reluctant to throw their hats in the ring,” the paper stated, adding advisers had been scarred by regulatory change, the Hayne royal commission and the need to comply with new education standards.
“These experiences have left many of them fearful about the perceived regulatory barriers to providing digital advice. Yet the regulations are clear that digital advice can be provided.”
In addressing the misconceptions, Six Park pointed out it was a ‘false belief’ that robo-advice failed to meet the best interest duty required of advisers.
“This is one of the most common myths preventing financial planners from considering how robo-advice could add value to their business,” it said.
“ASIC is very supportive of advice practices integrating digital solutions,” the paper noted, pointing to comments from ASIC commissioner Danielle Press during the 2020 FPA Congress.
Six Park highlighted that Press said understanding the reluctance of advisers to provide scalable advice was “probably the most critical thing ASIC is doing in advice right now” and the regulator had no problems with advice licensees building businesses around this type of advice.
The paper noted this approach by ASIC also addressed the misconception the regulator did not approve of robo-advice.
“Best interest duty is about matching the needs of the client to the service you provide. This is why ASIC has clear guidelines for scaled and digital advice,” it said.
“In 2016, ASIC published RG 255 – its regulatory guide on providing digital financial product advice to retail clients. The guide clearly states that ASIC supports the development of a healthy and robust digital advice market in Australia.
“When it comes to digital advice, it is clear that neither the regulations nor the regulators are the barrier – indeed, they provide clarity and support for adoption.
“Digital advice is not an alternative to holistic advice – it is a complementary offering that can help grow your business and the customers you serve in a compliant and efficient manner.
“Wealth practices around the world have already adopted digital advice, most notably in North America, and it is only a matter of time before the trend becomes the norm in Australia.”