We recently undertook a worldwide customer survey to understand what the perceived implications of robo-advice will be on the Australian mutual funds market.
Robo advice is only for serving the mass affluent sector
Respondents overwhelmingly disagreed that robo-advice is only serving the mass affluent sector. Robo-advice is clearly becoming a much more established form of investing amongst mass affluent and high net worth individuals – this may be due to its higher levels of efficiency and overall lower cost. At present the average assets under management per client is significantly lower for robo-advisers than for traditional advisers, but this is changing.
I would personally be confident to use a robo-adviser
Faith in robo-advice is on the up. A significant majority of respondents agreed that they would personally be confident to use one. The results do show, however, that there is still some anxiety in the marketplace. Robo-advisers do not necessarily, for example, provide advice that fits the client’s particular goals, objectives or life circumstance. They fit the client into a predetermined set of categories. This may lead to potential misspelling claims in the future.
Robo advice will eventually become the standard way of providing advice
Responses were mixed when asked whether or not robo-advice will eventually become the standard way of providing advice. It does face a few hurdles on its journey to become the main way of providing advice – a prolonged period of poor returns due to weak financial markets could, for example, turn away investors. Many clients feel that they can never replace the ‘human touch’ – financial advisers will need to start to differentiate themselves around customer experience if they are to maintain competitive advantage.
Despite this, the market is growing quickly and a number of large international asset managers are already buying their own robo-advice platforms. In June, the UK’s Financial Conduct Authority launched its own robo-advice unit. It is not necessarily, however, the threat that many advisers believe it to be – if access to cheap and easy advice encourages savings at a lower level, which in turn then moves to traditional advice as portfolios grow in value.