Media Release issued: 8 February 2023
The Quality of Advice Report made by Michelle Levy to the Federal Government makes it clear that technology, in particular digital advice, will be central to helping more Australians access the advice suited to their specific needs and situation, says Craig Keary, CEO Asia Pacific, Ignition Advice.
Mr Keary says the final report seeks to use four main levers to achieve its aims of making financial advice more accessible and affordable:
- Broadening the scope of what is considered personal advice, with most interactions with customers becoming “personal advice”
- Encouraging institutional participation in advice, including banks, super funds and insurers: that is, organisations with resource scale which can make large investments in advice supply
- Recommending that the SIS Act be amended to expressly permit super funds to provide personal advice to their members on a “fund-pays” basis, removing doubts over this issue and effectively expanding intra-fund advice
- Encouraging the application of digital advice technology, by financial advisers and organisations providing advice.
Mr Keary says the final report is a strong endorsement of the potential role of digital advice tools to make advice more widely available at no or modest fees.
“The high price of advice indicates that demand is already soaking up Australia’s 16,000 financial advisers, even before an extension of what is considered as personal advice. Digital advice tools will allow many more consumers who would benefit from advice to be served.
“Moreover, Ms Levy sees the use of digital advice tools as improving the quality of advice delivered to consumers.
“In her report, Ms Levy points to technology as having a crucial role to play in helping more Australians access financial advice, in particular by allowing institutions to offer advice at the simpler end of the advice spectrum to its customers.
“Indeed the only realistic way in which the advice gap can be solved by making low-cost advice available to large numbers of consumers.
“The report also highlights the ability for financial institutions to use digital advice technology to make their financial advisers more efficient, which is something we are already seeing work to good effect in the UK.
“Indeed Ms Levy concludes that the provision of digital advice does not require specific regulation or specific regulatory changes but is inherent in the drive towards “good advice”. Rather, the ability to provide widespread digital advice is an outcome of the recommendation that a “good advice” duty applies to any person or institution providing advice, including digital advice tools, rather than being an individual financial advice construct.
“By implication it is clear that financial institutions – banks, super funds, insurers etc – can use digital hybrid models today, rather than wait for any changes to the regulatory framework. By allowing financial advisers to use digital advice tools, they will be able to serve many more customers, at much lower cost, than has been possible in the past.
“The fundamental extension recommended is that employees of financial institutions who are not qualified financial advisers would also be allowed to provide personal advice (for example call centre or branch staff). It should be kept in mind that one of the recommendations is that the definition of personal advice is greatly expanded, to include many customer conversations which today might not be considered personal advice.
“The outcome should be an environment where more complex advice needs will continue to be met by qualified financial advisers, including via hybrid models, while simpler advice needs will be met by financial institution staff who are not qualified financial advisers. Such employees would be tightly supervised with digital advice tools to provide assurance to the institution that “good advice” was being delivered.
“The Final Report is the culmination of what has been the most productive government review of the financial services industry in many years and we look forward to its implementation,” Mr Keary says.