Greg Medcraft, chairman of the Australian Securities and Investments Commission (ASIC), said that in Australia, some existing advice firms and new start-ups were looking to develop new robo-advice models.
“We are engaging with the industry on these new developments and how they fit within the regulatory framework,” Medcraft told a conference of investment professionals in Sydney on Tuesday.
“We see the potential of robo-advice to offer a convenient, low cost trusted advice offering to consumers. We have a common interest in seeing these opportunities harvested, while at the same time mitigating the risks to consumer trust and confidence,” he said.
One of the big four Australian banks, the National Australia Bank, announced last month that it would provide computer-generated financial advice to consumers through its online banking platform.
“Trust and confidence in the financial advice sector is a major concern.”
The proposal, which NAB said was a first from a major Australian bank, is to initially roll the service out to 40,000 customers, though the bank has plans to increase this to 400,000 within a year and to ultimately offer the service to all three million of its online banking customers.
Trust problem
Medcraft said the work on robo-advice was part of its efforts to improve behaviour and rebuild trust and confidence in financial advisory sector.
He cited a national survey by market research group Roy Morgan which found only 24% of Australians say they trust financial advisers. A recent ANZ Financial Literacy Survey also pointed to an erosion of trust in financial professionals since 2011.
“Trust and confidence in the financial advice sector is a major concern,” the regulator said.
ASIC plans to develop a regulatory guide on review and remediation programs conducted by advice firms, where clients may have suffered loss.
“Consumers will have greater trust if they can be confident that any remediation program is consistent and transparent,” he said.
Bad apples
ASIC has formed a specialist wealth management team which focuses on large advice firms. Medcraft said it was looking closely at how the largest banks deal with ‘bad apple’ advisers.
“Adviser firms need to take greater responsibility for removing bad apples on an ongoing basis,” he said.
Medcraft also said the new Financial Advisers Register, launched on 31 March 2015, now listed over over 22,000 advisers and to date had seen over 290,000 searches by the industry and consumers.
It was also improving ASIC’s ability to identify and track the movements and history of financial advisers, he said.
