Digital innovation could be the answer to tackling product-choice confusion and reducing red tape in the financial advice sector, according to an academic.
Pamela Hanrahan, a lawyer and professor at University to New South Wales Business School, told Financial Planning Association of Australia members this morning that affordable advice for all and a thriving advice industry are achievable.
At the virtual keynote event, Hanrahan said that financial advice can serve the vast majority of Australians if technology or artificial intelligence works alongside advisers. It is perhaps selecting products for clients that has somewhat become a sticking point and where technology can play a pivotal role.
There is a proliferation of products on the market that is giving "an illusion of choice" hence leading to much complexity, she said, urging FPAs to embrace digital innovation in the products piece and the fact-finding stage as a starting point.
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The industry must get a clear picture of what the profession will look like in five years' time with the help of digital means, which will make it possible to trim down regulation otherwise it will compound, she warned.
Given that financial advice regulation is highly "overdone", Hanrahan rejected the notion that it could all be thrown away and that the industry could start from scratch.
For the regulators' part, Hanrahan suggested that what is not classified as personal advice should be subjected to lighter red tape.
Personal advice has a fiduciary characteristic, she said, meaning that advisers have the responsibility to make judgements that will advance clients' interest - and what regulators should focus on.
When it comes to tackling the question if the advice industry is able to regain trust again, Hanrahan said there "there is some distance to go."
It is not a matter of regaining trust, rather if advisers can be "trustworthy" again, she said.
David Locke, the chief executive of AFCA, appeared briefly at the virtual congress signaling some good news that the industry could be on its way to regaining trust and trustworthiness.
Locke said that AFCA receives very few complaints about financial planners, calculating to about 1.6% of the total work the complaints authority conducts.