Recently, the Australian Securities and Investments Commission (ASIC) presented its views on regulating digital advice at a Financial Services Council event. The discussion provided an overview of the regulator’s priorities in this space. Below are a few key takeaways relevant to those currently providing or seeking to provide digital advice:
- Clear disclosure: ASIC would like to see clear disclosure in relation to the services and advice a consumer may expect to receive and express statements regarding advice that the consumer will not receive. Consumers need to be able to easily identify what advice will and will not be provided to them.
- Testing consumer knowledge: ASIC suggests ‘testing’ potential consumers in the following ways:
- With respect to consumer protection – implementing methods to test consumer understanding of the scope of advice provided – that is, what advice will and will not be provided. Such protocols may alleviate any risk that a potential consumer is unaware of the scope of advice to be provided.
- With respect to better understanding your client, implementing ‘quizzes’ to gauge the consumer’s level of knowledge regarding different products, which may be offered. This could give the digital advice provider an idea of the level of knowledge and understanding that the consumer may possess in relation to complex products.
- Record keeping: Companies providing digital advice should have appropriate and robust algorithm record keeping systems. Ideally, the systems in place should control, monitor, review and effectively record any changes made to the algorithms. Digital advice providers should be able to substantiate the reasons for updating the algorithm, which underpins the advice given. Some examples of possible record keeping measures relating to algorithms include automated reports which can be downloaded and provided to ASIC if requested or snap shots in time.