Though we are yet to see a fully-fledged B2C digital platform that provides holistic financial advice in Australia, UK-based start-up Multiply AI has already proven that fully automated financial advice can be delivered in a regulated environment. With over 8,000 users, it boasts the world’s first fully automated, AI-assisted digital advice platform.
Interestingly, after two years since its inception, Multiply AI could only tap into 0.17 per cent of the UK’s massive £5 billion ($7.79 billion) advice market. Weighing up their current adoption rate with EY’s 2019 Global Fintech adoption index, it will take Multiply AI over a decade to capture at least 3 per cent of their target market. It is in fact a similar story for many such fintech start-ups around the world who are destined to deliver holistic financial advice without the need of any human inferences.
So, what is holding back such enterprises from capitalising on consumer demand despite being able to offer competitive prices and ubiquitous accessibility?
In November 2000, Bill Gates demonstrated a prototype of the first Microsoft tablet PC; a technology that he envisioned as the future of personal computing. Despite being a notable technological innovation at the time, the product never succeeded in gaining momentum among consumers. Among other palpable drawbacks, Microsoft failed in its effort to force fit its existing operating system into the hardware, expecting people would replace their desktop computers with a tablet.
In April 2009, the mainstream support for Windows enabled Tablet PCs ended.
The Microsoft Tablet fiasco reflects the behavioural economics of human decision making in adopting new technologies. Although being a superior technology at the time, consumers were quite habituated to using the Windows OS in their desktop PC and shifting it to a tablet PC meant a giant leap from their comfort zones. The very reason why Apple later succeeded where Microsoft initially failed was because they positioned tablets as a different consumer product with its own purpose and target market. Not surprisingly, consumers have now evolved to be confident and familiar enough to replace their desktops and laptops with a tablet.
It is the lack of this evolutionary transition in consumer habits that is deterring them from adopting new digital advice platforms. Much of today’s advice seekers are used to the traditional high touch client-adviser formula and replacing it with tech and removing the human element could scare them away. Perhaps re-shaping and identifying digital advice as a separate consumer service without the intent to replace traditional advisers but to reduce cost and increase accessibility would be the first step towards achieving consumer confidence and nudging them towards digital advice.
The abiding respect for the human element is enormous when it comes to financial advice. When clients seek advice from planners, they are not just looking to take the burden of decision making off and for the professional expertise, but the emotional connection, too. The level of emotional connection and trust conferred on a planner determines how well clients stick to their plan. To a great extent today’s technology still cannot provide this “human” essence to its users (though it may change in the future). This means that retaining the human element in digital advice is critical until the tech and consumers have evolved enough to be self-reliant on each other.
Preparing for the future
Amidst major industrial overhauls and the COVID-19 pandemic, it could be quite daunting for businesses to manage change and continuity. However, now is the time for business leaders to step back and look at the big picture. With technology reducing the distance between providers and clients, the traditional intermediaries are under pressure and it is only a matter of time until tech overruns them.
Businesses and advisers should be shepherding new technologies and work alongside their clients in changing their habits. The changes need not be drastic but rather simple ones like client portals, digital fact finds and risk profiling, delivery and execution of plans via a digital platform, etc that are gradually phased in. Though COVID-19 has accelerated the adoption of many such changes, advisers should continue to expand their horizons and seek to bring in more new client-centric digital tools and services to prepare them for what could be the future of the industry.
Shimon Jose, new business officer, Poynter Hargraves Financial Consultants
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It’s not really a good look for IFA to post the opinions of staff about automating advice when the practice involved is subject to some fairly serious ASIC actions centered around poor quality advice and poor oversight.
Yes I agree IFA , this person works for an AFSL that has been found not to be acting in clients best interests with the owner being REMOVED by ASIC as Responsible Manager of the license. Follow the money trail on robo-advice for the truth and it will lead to a product sale of some description just like this company’s own in house product !!
One of the main reasons “roboadvice” has had greater success in other countries is that they have a very loose definition of “advice”.
In other countries the process of selling consumers a portfolio of investment products is termed “advice”. That process is relatively easy to convert to digital. But it is not “advice” as we now know it in Australia.
Genuine financial advice advice in Australia involves a far broader and more professional approach than that provided by the online sales tools masquerading as “roboadvice”.
Yep good luck with managing the massive Australian and ever increasing BS Over the Top Advice Regulations.
Not only would such a system in Australia be so complex most people couldn’t use it without Advice anyhow.
Once set up the Govt will continually change the rules and Fintech will be continually having to spend to try to adjust their programs. Hope you can see the massive cost benefit for the 0.17% of the market. Enjoy.