Peter Johnston reports, QAR recommendation to implement Digital Advice into the Australian advice market is fundamentally flawed

The AIOFP is concerned the QAR recommendation to implement Digital Advice into the Australian advice market is fundamentally flawed with the potential of returning market conditions back to the pre – Royal Commission bad old days of highly conflicted vertically integrated advice – a very poor outcome for consumers.

Global research strongly indicates that specifically DIGITAL ADVICE [DA] for consumers has NOT satisfactorily worked anywhere around the world, the only form of digital success has been in the narrow PLATFORM PRODUCT DIGITAL ADVICE [PPDA] space where consumers have had limited benefit.

The attached global summary by Mr Richard Williamson, a Hong Kong based Australian global Expert on Digital Advice suggests that the difference between PPD and the broader DA [or aka robo advice] is the critical differentiating factor that needs to be understood by Australian industry stakeholders, Treasury and Politicians before making policy decisions.

The threat we see is consumer protection being diminished by diluting a best interests duty in favour of a ‘good advice’ concept to cater for a flawed generic digital advice solution when it is unnecessary. If the Institutions/Super funds/Banks [Banks] use PPDA purely for conveying product/generic factual information relating to their own internal products, consumer protection does not need to be compromised in the process.

If the Banks want to give comprehensive financial advice outside of their own specific products, then they should comply with the current Corporations Law, we cannot have a confused marketplace with inconsistent conditions for Adviser conduct. Recent history clearly demonstrates consumers get disorientated with an inconsistent Adviser market approach, some may say that had been the intention from the outset in the past.

More importantly, we don’t want to see Banks initially implementing PPDA in a diminished consumer protected environment then in future changing back to the bad old days of vertical integration offering sub – standard products when DA ultimately fails or they want to increase profitability.

The possibility of this outcome ever eventuating must be taken off the table to protect consumers by maintaining a best interests duty and safe harbour conditions. 

QAR has been quite clever with its promotional strategy of removing all the ‘no brainer’ compliance imposts but simultaneously ‘spinning’ the assumption that this is contingent on removing the best interests/safe harbour obligations to cater for digital advice. We strenuously disagree with this position.

If Banks/staff are given exemption from the Corporations Law Advice conditions to only convey internal product related factual information and the best interests/safe harbor obligations remain in place, it is a win – win – win for all stakeholders.

The Super Fund advice conundrum can also be solved with this approach. The Trustees can reduce their AFSL risk exposure, the cost of providing a full advice service by outsourcing it to the independent sector will be significantly mitigated and all Fund members will not be paying for a service only a fraction of members use; another win – win – win for all stakeholders.

We don’t want to see a currently flawed generic Digital Advice concept being used as a convenient distraction away from the statutory duty of all stakeholders to act in the best interests of consumers. Furthermore, Canberra must also act in the best interests of Consumers by rejecting the overtures from the Banking sector to dilute consumer protection for their own self – interest.

Despite some thinking the independent Advice community feels threatened by the installation of any digital advice, they would be wrong, we welcome it. It will service low net worth/low need clients and create a need with the higher net worth clients for more professional advice from a human. Digital Advice is part of the advice future, but it is NOT the all – encompassing panacea some are currently advocating.

To coin a truism and succinctly summarise, ‘we do not want to see the baby thrown out with the bath water’. 


Peter Johnston | Executive Director
Association of Independently Owned Financial Professionals
Suite 1211, 1 Queens Road, Melbourne VIC 3004
P 1800 111 203, d 03 9863 7574, m 0418 857 621 | Download my business card

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