Speaking to ifa, Patrick Garrett, founder and chief executive of automated investment management firm Six Park, said the launch of his business was inspired by the rise of robo-advice in the US and responded to flaws in the Australian advice industry.
“The investment, advice and management market, in our view, has been quite broken over here,” Mr Garrett said.
Australian advisers have not figured out how to cost effectively provide advice to everyday people and even those consumers who do “get the attention of financial advisers” often pay too much, he said.
“I know of many people who have had anywhere from $10,000 to several hundred thousand dollars who would come to me and ask me ‘How do I get this money into the market?’ with a lot of them saying advisers wouldn’t talk to them,” Mr Garrett said.
“Who’s going to talk to a $25-50,000 account when you can open an account and do it yourself? Well, how do you actually do it yourself? People end up buying the big banks, Telcos and mining and resources – horrifically diversified.”
According to Mr Garrett, a problem exists where those who do use financial advice pay too much to bank-aligned advisers who dominate the market and who, until fairly recently, were getting paid commissions that weren’t being disclosed to clients.
The entrepreneur and former JP Morgan private equity investor said there are significant opportunities in a relatively unimpressive Australian robo-advice landscape.
“There’s not really a lot of robos in Australia that are up and running that actually have a viable business that works effectively if you lift the bonnet, frankly,” Mr Garrett said.
“I’ve been a client of one of Australia’s main robo-advisers and I haven’t been rebalanced in two years. I’m guessing its because its a cost to them and they have pay for it.”
At the same time, Mr Garrett said there was greater opportunity for advisers to integrate automated investment tools to service the next generation of retirees.
Whilst you can argue over whether they provide advice (which in my opinion they don’t) his comments in relation to smaller investment balances remain accurate.
Thanks for the feedback. Not a fan of the term “robo-advice” either. Six Park is an automated investment service backed by experts with 200+ years experience. We use technology to lower costs, enable a simple way to create a diversified portfolio, and are fully transparent about the [u]scaled[/u] advice we provide. We don’t aim to put traditional advisors out of business, but rather offer a valuable service for people who simply need what we provide: low cost asset allocation advice that is regularly reviewed and rebalanced based on clients’ circumstances. Pay for the extras/holistic advice when inevitably required. Admittedly not for everyone, but there’s a real need for this service given abuses that have occurred in the market (this is what is “broken”, too many examples to list here). And for what it’s worth, we have heavily invested in compliance, risk management and audit requirements, including best interest duties. Pat Garrett, CEO, Six Park
Wish our Balanced Fund was run by robots to boost the performance.
Oh hang on , maybe it is, or is it our new fad in setting client goals.
This is all getting to hard so better go back to the simple product approach that our customers know, love and happy to pay for
Why are the robos failing? Because they cannot get the money in the door. B2C doesn’t work, look at the USA. I fully expect to Mr Garrett in two years time to be knocking on adviser’s doors to tell us about his new adviser focused robo solution.
At the end of the day, Robo Advice will evolve into something far more sophisticated than the current sub-standard models, changing the competitive landscape yet again. But as a self-licensed adviser, I can run my small, nimble practice profitably (and remotely) from a 13″ laptop these days. So this is an opportunity not only for automated investment providers, but also for forward looking financial advisers. Bring it on.
Another example of “robo asset allocation” masquerading as so-called “robo advice”. Advice relates to much more – assessment of objectives, super cont strategies, retirement adequacy, risk / asset /insurance protection, wealth creation/ protection, estate planning, etc. Where are these glorified calculators providing this?
if he really is in an automated rebalancing Robo that has failed in its responsibilities to rebalance ASIC should be involved. Or is it an irresponsible throw away line for self marketing ?
Robo Advice – is interesting, because if it is an advice model, as everyone calls it, then how are Robo Advice providers complying with all of the advice requirements that apply to a financial planner. That’s right they cover their website with disclaimers that says they are not providing advice, yet they call themselves Robo Advisers. Interesting. Perhaps they should be made to call themselves product sellers instead, to properly advise people who use them that they are not getting financial advice but are being sold a product. Robo Advisers have well and truly pulled the wool over ASIC’s eyes and are getting away without any of the compliance requirements that apply to the financial planners Patrick criticises. That is also why he has not been re-balanced in two years. To re-balance requires the provision of advice, and he is not paying for that advice. Patrick needs to re-balance himself, which he obviously doesn’t understand the mdel he is about to set up. Yet Patrick wants to complain and criticises financial planers service models because of the significant extra costs that they have to incur while the Robo Advise industry doesn’t comply with all of the best interest duties etc and therefore sidesteps all the associated horrendous cost of complying with all of those duties that financial planners are required to comply with.
If ASIC are happy to have Robo Advisers in the market, and happy for them not to have to comply with all of the best interest duties and associated protections afforded to investors by the legislation, then ASIC should not be forcing all of these requirements on financial planners. Remember at the end of the day Robo advisers software and investment algorithms are written by humans, and if financial planners, who are humans cannot be trusted to provide financial planning advice because they make errors, then the Robo Advisers software which is written by humans is also open to be full of errors.
great comment. I’m never going to use the term robo advisers again after reading your comment. perhaps advisers should be calling roboadvisers something else.. e products .robot products.dunno? maybe let’s all stop using this term otherwise we’re creating the impression these guys are going to be giving you advice.
robo-investment!! advice reins supreme
“Roboadvice” is unregulated online investment selling. Nothing more. Nothing less.