Super funds delivery of electronic financial advice to members has been “slow off the mark” because of regulatory worries, but compliance is simple, a legal expert said.
Compliance with the future of financial advice (FOFA) can be easily achieved if the scope of the advice is limited, and funds are “in a unique position” to take advantage of this scope, Jim Bulling, partner at K&L Gates said.
“Everyone is upping their game and sophistication of interaction, asking how it can be done and meet FOFA. There are minimum standards for retail advice and an increased responsibility to members which has made some think that electronic advice is therefore difficult to provide, but if you drill down you find it’s not. Funds can take advantage of limited scope advice in a way that totally complies (with FOFA),” Bulling said.
If the advice is limited to options within a fund, rather than the entire marketplace, then funds are meeting the regulatory requirements. The fund doesn’t need to offer the best possible option in existence for a member’s financial objectives, rather it just needs to offer the best internal choice.
Two examples Bulling gave were insurance and investment options. If a person wanted additional insurance coverage or guidance on their investment strategy electronic advice could deliver the answers and comfortably remain in the limits FOFA has set as the advice has limited scope.
Bulling also said an advantage of electronic advice is that it generates service-orientated architecture (SOA) which is “much, much cheaper” than current methods and could increase member engagement, but out of those developing electronic advice models there has yet to be a runaway leader.
“Funds still offer lots of telephone advice. That’s pretty expensive – hideously expensive – whether it is internal supplied, outsourced or both. Electronic advice is cheap and suits members. You can sit at home and talk about insurance or a limited range of investment options around the kitchen table. You can connect (to the electronic adviser) as many times as you want and even bring your mum in to have those conversations,” Bulling said.