Advice to feature in ASIC regtech showcase

Financial advice will be front-and-centre of a new event from the corporate regulator aiming to promote the regtech adoption in the Australian financial services sector.

The events are aiming for regtech start-ups, scale-ups and financial services companies’ in-house development teams to demonstrate their solutions.

The first event in Sydney, ‘Monitoring Financial Promotions: Demo and Symposium’, will let providers show how they can monitor, identify and analyse financial advertising to maintain compliance. It will take place on 2 August.

Visitors can learn about improving the detection of problematic financial advice in datasets at the second event, ‘Financial Advice Files: Demo and Symposium’, in Sydney on 22 August.

Finally, the third event is about the capabilities, benefits and costs of applying voice analytics and voice-to-text (VA&VT) research and analysis to regulatory activities. The VA&VT Symposium will be held later in the year.

ASIC is also undertaking a regtech trial to explore how it can communicate the application of its financial services and credit licensing requirements via a licensing technology-assisted guidance (TAG) tool. Its findings will be shared at a fourth symposium later in the year.

“There is a real need for new regulatory approaches, which is why ASIC strongly supports the development and adoption of regtech solutions in the financial services sector to provide better outcomes for consumers,” ASIC commissioner John Price said.

“Regtech is something we are keenly interested in, both as a consumer of products and a facilitator of engagement more generally to ensure innovation in this area is utilised.”

Regtech has the potential to support ASIC in the way it undertakes its regulation, the watchdog said, along with possibly helping organisations build a culture of compliance and save related time and costs.

ASIC is also calling for expressions of interest from potential demonstrators with regtech solutions for its ‘Monitoring Financial Promotions’ and ‘Financial Advice Files’ showcases. The regulator is seeking 10 firms to present for both events.

Details for the VA&VT and TAG tool symposiums will be released closer to the date. Both are based on trials the regulator is running with regtech firms.

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AI tool to change AFSL oversight of advisers

A new artificial intelligence-driven adviser risk management tool is being built in response to greater APRA and ASIC regulations, with the developer hoping to extend it to dealer groups in the near future.

Speaking exclusively to ifa on the Netwealth UK Study Tour, general manager of risk and compliance, Rachel Axton, revealed details about its new AI-driven risk tool SONAR that aims to improve the oversight of adviser behaviour on its platform.

Standing for ‘Security of Netwealth-Authorised Representatives’, Ms Axton said the idea came about around six to 12 months ago, and was developed in response to an internal ‘hack-a-thon’ aiming to work out how to improve oversight of adviser activity using its own data.

She said most of Netwealth’s data scientists saw it as a really good opportunity for artificial intelligence learning long-term to address the issue.

“SONAR was a concept that came about when the regulators, in particular APRA and ASIC, started talking to Netwealth more about our role as a trustee and IDPS operator and really actually asking us what do you do to oversee the conduct of the advisers that use our platform,” Ms Axton said.

“It’s something that we’ve always been giving some consideration to but we hadn’t really built specific tools to identify things. So we were working more on our intelligence and the things that the administration team would find.”

One factor SONAR is able to oversee is the breadth of fees that the platform charges, which Ms Axton estimates there are around 20.

While that gives the adviser flexibility to charge the fee that’s right for their client, what Ms Axton doesn’t expect to see is those fees being charged across all of those clients.

“What we found was that there were some very small number of use cases where advisers were using multiple types of fees on the one client,” Ms Axton said.

“We were able to talk to them and to actually let the dealer group know and quite often the dealer groups didn’t know about this activity either.

“We built it out. We’ve got factors such as fees, activity on the account and logins and how often the adviser is actually going in to service the client. “

Ms Axton said there are 20 different factors that are in the process of being built out. Over time, she hopes the tool will give each adviser a risk score based on the number of multiple risk factors that they’ve got.

“If you haven’t logged in for six months and haven’t done any transactions on the account for 24 months and has high fees across the account,” she said.

“The problem is we’ve got hundreds of advisers to look at and this allows us to identify those most important cases first, and as we add a new factor, the whole risk framework will change and the risk ratings will change, so what we’ll be able to do is identify which one of those is the most risky and be able to go straight in and talk to them about that activity.”

While SONAR is currently an internal tool, Ms Axton said Netwealth has been writing to dealer groups, and has found the feedback from the dealer groups has been really good.

Depending on demand the adviser dealer groups, she said SONAR could be released externally within the next six to 12 months.

“So when they get us contacting them saying, ‘We’re you aware of this?’, it gives them the power to go off and do an investigation,” Ms Axton said.

“What we need to do is build out the factors and build out the use of the tool and then what we’ll do is we’ll expose it to dealer groups so that they can go on and start doing their own reviews and we’ll probably need to help them through with that and how to interpret that and how to change the dial.

“While not on the Netwealth ‘roadmap’ for an external release, it depends on demand from advisers and dealer groups if we’ll do it sooner.”

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UK experience shows bright future of advice in Australia

The dramatic drop in the number of advisers in the late 80s in the UK shows that the future of advice in Australia is bright, according to a UK academic.

In a speech to delegates at the Netwealth UK Study Tour, associate lecturer of the University of Northampton, Gillian Cardy, said that while Australia was 20 years behind the UK, this was good in showing that independent advice has a future despite the added regulations.

She noted that the number of financial advisers in the late 80s dropped from over 100,000 to swiftly “something in the order of 30,0000 and now it’s 25,000”.

Because what happened when the UK first started having meaningful retail regulation, Ms Cardy said pretty much all of the big direct sales companies stopped selling, with a couple of exceptions, and even then they had small residual sales forces.

“And that huge drop off was, if you look at the numbers now, almost entirely from the big, old-fashioned, direct sales product providers that used to have really big distribution networks in the UK. That’s the drop off,” Ms Cardy said.

“And that’s why I think you can be extremely confident whenever we talk about self-licensed advisers have a future … yes you do because we’ve spent [over] 20 years proving it. You do not need to be a part of these big sales forces, the banks and the insurance companies.”

“And from their point of view, the costs of doing it, the higher levels of compliance, monitoring, training, support and so on, may not be cost-effective for them to maintain these huge networks of advisers.”

To add further context, Ms Cardy said the 80s was when the UK first introduced school-leaver, minimum levels of qualification, whereby anyone could have one job one week and, in a fortnight’s time, they could be out doing financial advising..

“The system had no credibility whatsoever and they’re selling stuff at the same time so I think there was a bit of a perfect storm,” she said.

“The companies stopped providing it, people left, they didn’t want to get qualifications and so on. So those people were, if you like, lost to financial services.”

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AI to impact the future of advice: Netwealth

The rise of machine learning and artificial intelligence will impact every aspect of advice over the next five years, according to Netwealth.

In his welcoming address to delegates in its UK Study Tour 2019, Netwealth joint managing director Matt Heine revealed some finding from its most recent AdviceTech Report, which he said would be released in two weeks.

On the technology front, 36 per cent of those surveyed said AI and machine learning will have the greatest impact on financial advice practices in the next five years.

Regtech was also cited as a major impact with 36 per cent of respondents, and was closely followed by robo advice at 34.8 per cent and scaled advice at 34.2 per cent.

Managed accounts (28.6 per cent) and big data (27.7 per cent) were also cited as likely to have a major impact on financial advice in the futures.

“Technology is going to improve every single part of your business. I don’t think anyone can argue with that,” Mr Heine said.

“What was interesting for us though was the type of technologies that advisers are now thinking about. When we first did this report three years ago, AI was so far down the bottom of the list it wasn’t funny. It wasn’t in anyone’s thinking.

“Whereas I think there’s a very good recognition now that AI is going to be leading the charge in pretty much everything we do.  Whether you know it or not, it will be sitting in the background and delivering value.”

Mr Heine noted the rising impact of regtech on advice, and remarked that robo-advice in the post royal commission world has a place in the market, calling on delegates to provide feedback on what it should be doing for advisers in the robo-advice space.

Further, Mr Heine said it was also interesting that managed accounts are getting closer to reaching maturity.

“All the early adopters are well and now truly on the path to managed account implementation and hopefully are seeing the benefits,” he said.

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Netwealth reports bumper quarter as FUA lifts 11%

Netwealth has reported a $2.1 billion increase in funds under administration for the March quarter, its largest quarterly increase since listing on the ASX in November 2017.


In providing its March quarterly business update to the ASX, Netwealth’s FUA stood at $21.1 billion as of 31 March 2019.

Netwealth’s FUA net inflow for the March 2019 quarter was $0.9 billion, with market movement accounting for a further $1.2 billion increase.

Compared with the March 2018 quarter, Netwealth’s FUA rose by $5 billion, a 31.5 per cent increase.

“During the past six months, an unprecedented number of new advisers have selected Netwealth as their preferred platform and our new business pipeline continues to grow and will convert to inflows throughout 2019 and beyond,” Netwealth said.

“The fourth quarter is typically the strongest quarter for net flows and we expect this trend to continue this year. We expect FY2019 FUA net inflows to exceed FY2018 FUA net inflows of $4.166 billion, subject to the timing of client transitions continuing as expected and our forecast organic growth.”

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