Digital boards can raise compliance standards

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Fintech providers have responded to adviser feedback on their viability as a way to reduce the cost of advice, pointing out that they can reduce costs without reducing quality and are able to comply with regulatory guidelines.

Earlier this week, money management Reviewed individual submissions to the Advisory Quality Review that noted advisor concerns regarding the use of fintech in the advisory and compliance process. These included issues faced by large organizations, compliance of digital advice with regulatory standards, and the cost of technology.

Matthew Esler, co-managing director of Padua Solutions, said: “At this time, the time and cost [of providing advice] is very high and passed on to the client, the affordability of advice is deteriorating rather than improving. Fintech can help with this and significantly reduce hours.

He said one of the reasons fintech has seen less adoption is that it has focused on areas that would help the licensee, who typically pays for the technology, such as managers of the customer relationship management (CRM), rather than helping individual advisors. Among the software most commonly used by advisers were Microsoft Word and Excel, he said, which presented a real opportunity for improvement.

“Advisors have been looking for ways to use technology to save money, but it reduces quality, that’s backwards. You want technology that can ease the pressure on advisors without reducing quality.”

Craig Keary, Managing Director APAC at Ignition, said: “We believe that digital advice does not replace the great work that human advisors do, but rather builds on a human advisor and makes them more effective and efficient. more efficient.”

On cost, Keary said digital counseling technology could lower the cost of providing counseling by up to two-thirds from its current cost of around $3,500 per year on average.

Several respondents pointed out that they were unsure whether the technology would allow them to properly meet their regulatory obligations, but Keary said the Australian Securities and Investments Commission (ASIC) had already provided guidance for fintech.

“Digital advice is already swimming between the flags and meeting all the compliance requirements of traditional advice rules such as the duty of best interest and the relevance test.

“Digital does not dilute compliance standards; rather it raises them. In particular, the automation of data collection, verification, and algorithmic development of recommendations results in consistent, quality results for consumers.

Both Esler and Keary pointed out that adoption of fintech and robo-advice was higher overseas, demonstrating a possible path for Australia in the future.

“Some tools struggled here but then found a niche overseas, the Australian market is more complex, especially with tax and pensions,” Esler said.

“It is already evident that digital advice is taking hold in the UK, with the use of technology to facilitate the provision of digital advice no longer seen as radical. Our experience in the UK and Europe shows that hybrid digital advisory models are currently the dominant institutional preference.We expect all UK financial firms to integrate digital advice into their strategy by the end of 2023.”


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