What ASIC, grappling with the lawless state of Australian robo advice, must learn from the driverless car industry

September 26, 2016

As global tech heavyweights Google and Apple, along with emerging automotive brand Tesla and even global taxi industry disrupter Uber vie for dominance in the fast developing ‘driverless car’ space, the relevant legislators have struggled to keep pace with those persistent software developers.

Perhaps spurred on by the first death of a motorist who placed too much trust in the autopilot technology of his Tesla Model S, the US Secretary of Transportation recently unveiled the first set of rules outlining how the White House intends roping in what to date has been a lawless area of emerging technology.

The new US federal policy imposes a 15-point safety assessment on any company test, manufacture, or deployment of autonomous vehicle technology. Companies will be asked to submit answers to 15 safety questions along with reportedly significant amounts of data to verify any assertions. Will these companies freely share their data (and presumably trade secrets) with Washington?

So what, you say?

Well, it draws an interesting parallel: the potential standoff between the White House and Silicon Valley and other traditional car manufacturers, reflects what is currently shaping up between Australia’s corporate cop and a swag of digital advice providers operating everything from online calculators to complex cloud-based financial algorithms.

My view is that the rules around digital automated advice must be tough. Enforceable. Not an opt-in or a ‘nice to have’ recommendation. Data and algorithms underpinning advice must be subject to scrutiny by qualified experts. There is too much at stake for Australia not to get it right and lead the world with best consumer practice in this emerging area.

Already, some well-placed commentators reflect my own concerns and have flagged that loopholes exist in the ‘low minimum standards’ recently released by the Australian corporate watchdog, ASIC. Its RG255 guidelines give an uninspired insight into the catch-up thinking at ASIC. Its views expressed in RG255 on digital advice show a low-bar for some of the high claims being made about all things ‘robo’ in the industry.

According to ASIC, RG255 brings together ‘some of the issues’ that digital advice providers should consider – from the licensing stage through to the actual provision of advice.

ASIC says: “RG 255 also includes guidance on some issues that are unique to digital advice, such as how the organisational competence obligation applies to digital advice licensees and the ways in which digital advice licensees should monitor and test their algorithms.”

Is self-regulation good enough?

The financial services industry, least of all the major institutions with existing reputational issues of their own, can ill-afford a series of unforeseen robo advice ‘car wrecks’ and a roadway littered with the destruction of client wealth and customer livelihoods.

In my next blog on this topic I will explore further the parallels between the driverless car industry and digital automated financial advice. Just as the car manufacturers are not yet ready to roll out a fully functioning, smart vehicle that replaces human intelligence and intervention on the roads, the so-called ‘robo’ industry is equally years away from deploying systems that render the human adviser redundant.

 

Jacqui is the founder of Adviser Intelligence. Today with her team, she has enlisted the brains of PhDs, human behaviour experts, digital UI/UX experts, global actuaries and a large development team to solve the adviser and consumer experience for digital automated Goals Based Advice.

Jacqui is passionate about solving the complexities of automating holistic advice for the betterment of consumers and the amazing advisers who service those people.

Jacqui Henderson