(pictured: Jan Kolbusz)
Super funds have started to embrace, after a long period of either consideration or procrastination, the use of sophisticated member engagement and other personal advice tools, although they are generally shunning the popular term of ‘robo advice’. Jan Kolbusz, an early entrant with a history in investment admin, offers his take on accelerating developments.
Following the release of its guidance on digital product advice for retail investors, RG 255, on August 30, Kolbusz, the founder of Decimal, believes that rob advice has the potential, at least, to prevent many of the scandals which have plagued the financial advice industry for years.
Before starting Decimal in 2007, Kolbusz was an adviser to Synergy Energy WA and before that a director of wealth solutions at Asgard.
He says: “The scandals have inflicted irrefutable brand, reputation and financial damage. But they could be a thing of the past… Digital advice technology, if properly designed and implemented, has the potential to eliminate advice failures by facilitating and monitoring the delivery of effective and compliant advice, leading to improved member and client outcomes.
“Coupled with a traditional human adviser to provide validation and coaching, if required, it’s an unbeatable, scalable combination that’s able to restore consumer confidence in the financial service industry and lift demand for advice.”
In RG 255, ASIC describes exactly what a compliant digital advice solution should look like. It examines the licensing obligations for organisations offering digital advice, or considering offering digital advice, and reinforces the need for digital advice providers to define the nature and scope of their advice upfront, and clearly explain what advice they don’t offer.
It specifies that digital advice providers must have a system for performing the following tasks.
- Qualifying customers upfront
- In-journey validation
- Ongoing monitoring and testing of advice and algorithms
- Logging, storing and retrieving data
Importantly, RG 255 provides a clear benchmark for the fledgling digital advice industry to aim for.
The release of RG 255 coincided with the launch of ASIC’s Corporate Plan for 2016-17 to 2019-20 in which it listed digital disruption, new business models and “complexity in financial markets and products, driven by innovation” as major long-term challenges and opportunities.
It also acknowledged that technological innovation had the potential to improve efficiency and be a “powerful force for competition, driving the development of products that better meet consumer needs and improve customer access”.
Digital advice is unquestionably a new advice model that can give more Australians affordable access to quality advice.
But the strength of leading digital advice solutions won’t be cool algorithms or beautiful front-ends, although they’re important.
The strength of leading digital advice solutions will be the complementary relationship they have with traditional advisers to ensure clients’ needs are seamlessly met.
As the advice industry progresses further along the digital path, there’s a realisation that it doesn’t have to be one or the other.
There are complex situations beyond the scope of digital advice. There are low-value clients that traditional advisers can’t service economically. There’s room for both digital and traditional advice, and increasingly a hybrid “omni-channel” model that combines the two.
Generally, ordinary Australians are unlikely to support a purely automated, online solution unless they’re comfortable that capable, qualified people are behind it monitoring the advice they receive and ready to proactively step in if needed.
Kolbusz says: “Using the airline business as an analogy, there’s a reason why millions of travellers pay more to fly with top airlines over budget carriers. Both have automated systems for finding and booking flights and checking in, and 90 per cent of the time people will transact and fly without a glitch but many travellers will happily pay more for the peace of knowing that they can pick up the phone at any point and speak to a trained, experienced person if they’re stuck.
“How much more important is it for financial institutions dealing with peoples’ life savings, insurance needs and retirement dreams, to give their members that certainty and confidence.”
Decimal will launch a new white paper next month examining the impact of ASIC’s recently released RG 255 guidance.