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Correct judgement needed for super robo-advice
Superannuation funds providing digital advice must be able to discern if a member's responses and behaviours make sense, according to Decimal.
The robo-advice platform solutions provider's white paper on the Australian Securities and Investments Commission's (ASIC's) regulatory guide for digital advice, RG 255, pointed to the fact that digital advice solutions should combine technology and human judgement to ensure investors receive quality, compliant service and advice.
"For example, if a 60 year old widow nearing retirement wants to invest the majority of her super in a high growth fund, there must be systems in place to recognise that that is not an appropriate strategy under the circumstances and prevent the client from proceeding," the paper said.
The white paper also posed questions that asked how a retail bank with millions of bank customers offer cost effective and compliant personal scaled advice about a customer's super or insurance.
"How does a super fund, that only offerings an account based pension and annuities, offer a personal advice proposition to all members when caps might require additional products to be considered?" it said.
"Currently, funds have no choice but to hand those members over to a traditional adviser in a third party dealer group.
"Digital advice aims to overcome such limitations by creating algorithms to generate objective personalised information and advice. Furthermore, regardless of the system's results, customers can require to speak to a person for validation."
Decimal also said another fundamental challenge for institutions was defining the scope and parameters of their limited advice offering and managing conflicts.
"For example, a scaled advice proposition backed by a life insurance company will be geared to sell insurance so how to they deal cost-effectively with a customer who wants to reduce debt and start a savings and investments plan?" it said.
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The future of superannuation policy remains uncertain, with further reforms potentially on the horizon as the Albanese government seeks to curb the use of superannuation as a bequest vehicle.
Superannuation funds will have two options for charging fees for the advice provided by the new class of adviser.
The proposed reforms have been described as a key step towards delivering better products and retirement experiences for members, with many noting financial advice remains the “urgent missing piece” of the puzzle.
APRA’s latest data has revealed that superannuation funds spent $1.3 billion on advice fees, with the vast majority sent to external financial advisers.
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