How pre-QAR best interests stalled ‘bionic advice’

Mike Taylor

Managing Editor/Publisher, Financial Newswire

14 February 2023

Investment manager abrdn and platform business HUB24 have admitted that it was concerns around the existing financial advice regulatory regime and ‘best interests’ duty which saw them delay the development of ‘bionic advice’.

The admission has come as abrdn has responded to the final report of the Quality of Advice Review (QAR) stating that they “could rapidly accelerate the delivery of digital advice” by super funds and asset managers such as abrdn and “significantly improve access to cost-effective advice for Australians.

Abrdn is one of the few investment management companies to openly canvass involvement in electronic advice delivery.

Outlining his firm’s views on the QAR final report, abrdn executive adviser Jason Nyilas said the proposed shift from a prescriptive ‘best interest’ duty to a principles-based ‘good advice’ duty for advisers would remove significant roadblocks to providers who were waiting in the wings to provide Australians with digitally delivered advice and investment solutions.

“abrdn believes the future of digital advice is bionic advice which combines the power of an artificial intelligence- driven digital advice process with human adviser interaction. However, efforts to develop a bionic investment advice service in partnership with HUB24 have been delayed because of concern advisers that use the service may not satisfy the ‘best interest’ duty to clients.”

Nyilas said if the QAR recommendation for a replacement ‘good advice’ duty was introduced obstacles to introducing wide-ranging bionic advice solutions that abrdn has successfully operated in the UK for several years could be more easily replicated and implemented into the Australian market.

Existing hurdles would be largely removed through QAR’s reforms to reduce regulatory complexity.

In addition, Australian superannuation funds, which have a responsibility to formulate retirement income strategies for members under the recently introduced Retirement Income Covenant, would be able to more easily harness bionic and other digital advice strategies to satisfy this requirement at a lower cost to members.

“If the proposed QAR recommendations are introduced it will streamline and accelerate the introduction of digital advice in Australia and play a major role in reducing the advice gap and lead to better informed financial decisions for many more Australians,” Nyilas said.