In its latest Trialogue blog post, the superannuation industry consultant said the excitement over the democratisation of personal financial advice that was promised to Australians via robo-advice offerings has waned.
“Ultimately, the industry has been too narrowly focused in its attempt to bring digital advice to the mainstream. To-date, available propositions fall mostly into two categories: investment advice and retirement calculators,” the blog post said.
The digital investment solutions available to consumers offer little to a majority of Australians and actually cater strongly to the wealthiest 20 per cent, it said.
“Having led the vanguard with what most people think of as ‘robo-advice’, digital investment advice providers typically seek to algorithmically match customers’ risk or behaviour profiles and discretionary investment goals to model portfolios,” the post said.
“Such offers certainly have a clear mechanism for revenue generation (investments are normally passive with a healthy mark-up), but the market need they’re attempting to address is less obvious. In a defined contribution pension market where mandated pension saving is universal, the value of advice that operates specifically outside of this environment is questionable. How many Australian consumers have both the means and the desire to invest outside of super and property?”
The consultant said the proportion of the population with investible assets for which it might make financial sense to invest through such offerings are the wealthiest 20 per cent of Australians – the very same people who can already afford holistic personal advice.
Further, while algorithmic advice tools like calculators are a leap forward in digitising advice for direct consumption, for most Australians, the scope of the advice on offer is far too limited, it said.
“Digital advice, in theory, is well suited to addressing both the issue of affordability and of value, at least where it pertains to people’s confidence in being able to help themselves, but we are yet to see propositions that genuinely tackle the advice gap effectively,” the post said.
Agree with the sentiment of the article, but anything that can be done to lower the cost of advice and make it more accessible to more Australians is a good thing. Technology can lower cost to serve and therefore the price of advice; and facilitate time-saving non-face-to-face interaction thus going some way to addressing the cost and time-investment of seeking advice.
The advice market also needs to develop in more advice areas – for example cashflow. Let’s help more people make more headway – spend less than they earn and do clever things with the difference to grow and protect wealth. There have been great robo developments in this cashflow area, like MoneyBrilliant, MyProsperity etc.
Roboadvice is just unregulated online product flogging. A bit like tied agents from the 80’s and 90’s. No significant benefit to consumers, but big benefits to product manufacturers who can use it as a cheap distribution channel.
The end game for all roboadvice companies is to get a tiny bit of market share to prove the mechanics, then quickly sell the whole thing to a product institution. It will be the institutions’ way of getting back to their preferred tied agent model that has been progressively eroded by financial planning regulation.