Speaking to ifa ahead of his upcoming tour to Australia with the BT Adviser Roadshow, Mr Bachrach said the rise of automated financial advice applications – which have proliferated in the US in recent years – will affect different types of financial advice providers differently.
“The robo-adviser doesn’t compete with a true values-based financial planner, it only poses a threat to someone that just gathers assets and places them in funds and collects a percentage without adding much value,” Mr Bachrach said. “True advisers are paid for the value they add as a human being.”
At the same time Mr Bachrach suggested that a significant number of practising advisers currently fit the description of FUM-remunerated asset gatherers, particularly in the US, indicating the impact may be widespread.
While automated tools are highly competitive on the investment management front, they cannot compete with the human element, meaning successful advisers in the future will need to “stick to things that only humans can do”, he said.
Mr Bachrach drew a parallel between the rise of robo-advice and the rise of managed funds in the early 1990s.
At that time, financial advisers in the US thought they were not going to be able to compete against the Wall Street investment houses’ push into retail funds management.
However, Wall Street execs soon realised they needed advisers in order to stop people exiting the products prematurely, or, in other words, they needed the human element.
In the same way, Mr Bachrach suggested that robo-advice entrepreneurs will soon realise they will need advisers to keep people using their technology.
“Advisers are there to stop people [from making] poor decisions, and a robo-adviser doesn’t have capacity to do that,” he said.
“But it can compete on the investment side – in fact, the machine is probably better at it.”
The consultant and former Merrill Lynch adviser said he foresees a future where a majority of advisers outsource the asset management to a robo-adviser and focus on the client goals and objectives.
Responding to the robo-advice trend will be a key theme of the ifa Business Strategy Day. For more information visit http://www.businessstrategyday.com.au/
Wow.. who writes your material Anti? Your mum …Just shows you’re devoid of capacity to make sense let alone a coherent argument. You’re a nutter.
Few ales over friday lunch Pugsly? Product provider picking up the tab?
Good advisers should be able to leverage these products and provide their clients with a low priced alternative to mastertrusts and wraps.
The ‘roboadvice’ aspects of these are hardly revolutionary – Having someone fill in an online risk profile questionnaire and applying a portfolio is nothing, creating a portfolio that is simple to manage and transparent for a few basis points is revolutionary. Some of these products in the US that are based on ETFs are ridiculously low cost (although brokerage is dirt cheap there).
Advisers shouldn’t feel threatened by this, but embracing a new paradigm that allows them to easily cut out the banks & wealth management companies.
Anti VI…..you obviously read a different article as this refers to the US. If you knew anything about the US market you would know that only some parallels exist. But fact, understanding or commonsense has no bearing on statements you make. The impact of this is likely to be severe for you given your obsession with products.
Just saw a client who received a letter from MLC instructing them on how to access their account on line to make investment switches. So not only do they target clients directly, they are targeting clients in advice relationships. Not only is it poor form it also reflects how ignorant they are around client management. Dalbar studies provide convincing evidence that clients are their own worst enemy in deciding when to enter/exit markets. So what does MLC do ? Encourage them to transact online. Honestly. And these clients have an adviser. MLC do you still not get what an adviser does for his/her clients ???
You might not think its all that revolutinary but as backarack says, most advisers are actually product floggers. if there really are as many of these things overseas as we hear, then the impact could be severe for some
Such a revolutionary view…who would have thought!! Going direct has always been an option. Giving it a ‘hip’ name changes nothing. Good advisers have always had value in amongst all the BS that is ‘product’.
Robo Advice has been here for years- its called bank executives and industry fund bigots flogging product via inexperienced and underqualified ‘advisers’. The words Robo , Bank and Industry Fund should not be used in conjunction with the word advice. It is a contradiction in terms. Product floggers would be better reflect reality.
Their will be a percentage of people who will try to ‘do it themselves’ just as there are already. No doubt the tools to do so will improve, but ultimately the vast majority of people will continue to put financial decisions in the ‘too hard’ basket. That is why advisers with great interpersonal skills will always have a significant role to play. The tools and regulations will change, but what drives people to seek out professional advice will not change.
Then we’ll have robo-product floggers! I’ve seen Terminator, this does not end well!!