ASIC’s examination of online advice must address and reinforce compliance and comprehensive audit trails in order for the industry to evolve following its findings.
The corporate regulator late last month announced it would commence proactive research projects on self-managed superannuation funds and online advice services in the next 12 months.
“It needs to be a case of ASIC reinforcing the requirement for any organisation giving advice to demonstrate how they are ensuring that the online advice is compliant and that they can demonstrate an audit trail of what advice was given to whom and by whom,” Decimal managing director Jan Kolbusz told InvestorDaily.
“We’ve been increasingly concerned about the number of organisations that have just bought stand-alone statement of advice (SOA) generators and so when it comes to online advice, the problem becomes even scarier.”
Kolbusz likened the scenario to a bank teller working on a stand-alone computer, who would then be required to manually send data to the central bank and would also need the central bank to get a breakdown of all the work that was completed, as an audit trail.
Historically, technology in the advice industry had been stand-alone, but the model could not be upheld as it rapidly moved into the area of scalable and online advice, he said.
“That was not an issue when the industry was only advising 20 per cent of the population who typically had north of $200,000 because when the advice was given, there were always people who manually checked that advice because of the material amounts,” he said.
“So the fact that it wasn’t automated or centralised was largely overcome.”
However, many financial planning scandals could be traced back to the fact advisers had given dishonest advice and their dealer group did not have a direct line of sight over what advice was given, he said.
Such problems have yet to be acknowledged as the quantity of online advice has not grown dramatically. Instead, the focus has been on how quickly SOAs can be generated.
“But there are massive compliance and security concerns around that,” Kolbusz said.
“We can take cues from other industries, as it should be one complete, end-to-end system.”
Last month, ASIC commissioner Peter Kell said the regulator would look into the obvious limitations of online advice services.
Industry Super Network (ISN) manager Robbie Campo said as online advice was an emerging channel for advice delivery, ISN welcomed ASIC’s research project as it might assist in establishing regulatory parameters, within which providers could offer online tools and meet all legal requirements.
“In particular, we are aware that many providers and their legal advisers are still reasonably conservative in their approach to online advice delivery,” Campo said.
“There are particular challenges associated with online tools, but properly developed tools can be extremely useful for members, particularly for more straightforward advice needs.”
Like any scaled advice service, online tools should be integrated with other advice services to ensure members were able to access a level of advice that matched their needs and circumstances, he said.
