ASIC fears delay to Abrn, Hub24’s digital advice foray

It is understood that Abrdn and Hub24 have conducted countless workshops and briefings with Australian Securities and Investments Commission staff over the past few years, but have been unable to clarify “to what good looks like”.

Both companies incurred “significant costs” due to the additional legal, actuarial and business background work needed to try to give customers enough confidence to test the service.

We believe government, regulators and industry have an obligation to work together to find a solution.

— Andrew Alcock, Managing Director of Hub24

The market was further spooked because an early attempt by fintech Plenty Wealth failed after ASIC questioned its ability to meet the Best Interests Obligation (BID) under the law. It closed shortly after.

“No test showed that the IDB was carried out in a digital journey,” Mr. Nyilas said.

“It is up to the companies to find out, after the case, whether they succeeded or not. This is posthumous,” he said, describing the situation facing digital advice providers as a “high jump without a bar”.

Hub24 chief executive Andrew Alcock said the “apprehension” of financial advice providers to deploy the available digital tool would not stop the company from “continuing to invest” in digital innovation.

“Australians deserve access to quality financial advice,” said Mr Alcock. “We believe government, regulators and industry have an obligation to work together to find a solution.”

Sandbox Solution

Abrdn, Hub24 and other members of the Financial Services Council are calling on ASIC to take a more lenient approach to digital advice experiences, allowing the service to be tried with consenting consumers without fear of lawsuits.

A similar program has been launched by the Monetary Authority of Singapore, under which the strict city-state laws are relaxed while financial product innovations can be tested in a “regulatory sandbox” approach.

The Albanian government has indicated that improving access to financial advice, including digital forms, is a priority, but has not yet released firm plans for regulatory or legislative change.

The Treasury Board Quality Review, chaired by Allens’ partner Michelle Levy, is expected to review laws that impede the digital board market and report before the end of the year.

But Mr Nyilas said the industry could not wait for the recommendations of the Levy review to be implemented before starting to provide digital forms of financial advice. “It could take at least a year,” he lamented, saying Abrdn intended to launch the pilot before December.

He said the long-term viability of the wealth management industry depended on getting the right policy settings for digital advice, as well as the financial well-being of many Australians.

“It’s plan A for the industry, there’s no plan B,” said Mr Nyilas, a former financial services partner at EY.

“We cannot reverse the downward trend in the number of advisors. We cannot fire everyone who wants and needs advice but cannot get it. »

He said Australia’s policy support for cost-effective, digital forms of advice was “far behind” not just Singapore but the UK, where Abrdn already offers digital advice to regular consumers with the aim of producing a ” complete customer journey for around £. 500 ($867) – compared to the median cost in Australia of around $3,500.

Only 10% of the Australian population receives professional financial advice, down from around 14% in 2018. The number of licensed advisers is expected to be half as many next year as it was in 2018.

“Problem solver, not researcher”

ASIC Chairman Joe Longo acknowledged concerns about the complexity of the laws governing financial advice, but also said an “overcautious” approach to compliance by the industry was key. of the problem.

Mr. Nyilas said that Mr. Longo’s statement was not false, but that highlighting the industry’s fears does little to alleviate them. The regulator must become a “problem solver” rather than a mere policeman or “problem finder”, he said.

ASIC held a consultation on “promoting access to affordable advice for consumers” in 2020. It did not publish a report detailing its response to the consultation, but did publish an infographic detailing feedback from industry and updated its guidelines for issuing legal documents to clients.

An ASIC spokesperson said Australia had established a regulatory sandbox for “start-ups and scale-ups” in the fintech market, but said expanding its scope to more established companies and licensees would be a government responsibility.

“ASIC does not endorse any individual financial services product or business as compliant with the law,” the spokesperson said. “Companies can seek independent legal advice to ensure that the financial services and products they provide comply with the law.”

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