Planners, not robo, to be face of advice

21-Dec-2016

By Daniel Paperny

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Despite the growing proliferation of robo-advice offerings, clients would still seek out the experience, empathy and emotional intelligence of human advice interactions, according to IOOF.

IOOF Group general manager of wealth management Renato Mota said the current iteration of robo-advice offerings in Australia often fell short when it came to dealing with more complex advice scenarios surrounding a client’s “full financial picture”.

“Robo-advice is adept at finding a well-balanced exchange-traded fund (ETF) or a low-cost index fund and can even consider a client’s appetite for risk. But is this advice or simply a financial product?” Mota said.

“Financial advisers are able to ‘think outside the box’ to generate new ideas [surrounding] complex issues such as tax minimisation, aged care, insurance and debt and whether a client’s money could be better invested elsewhere – such as in property or through super.”

Speaking to financialobserver, State Street Global Advisors head of SPDR ETFs Shaun Parkin said a key hurdle for robo-advice providers in Australia was the “incredibly low margins” associated with digital advice, resulting often in a highly scaled proposition.

“Scaled, digital or robo-advice can be seen as a legitimate form of advice because it’s thoughtful, it’s strategic and it’s asset allocation. It’s nothing that is absolutely different, it’s just that the implementation is different now and how investors face off against it is different,” Parkin said.

“[However], even the most successful version of these [digital offerings] such as Wealthfront in the US is still relatively small on a funds under management basis.”

Mota said the advent of robo-advice in Australia represented an opportunity for planners to take advantage of technology in the provision of financial advice to clients, however, the extent of its adoption and success in advice practices remained to be seen.

“Computers will always be faster than humans at quarterly portfolio rebalancing, asset allocation or tax-loss harvesting, however, for most advisers these are not the most valuable use of limited resources,” he said.

“[Advisers] provide the ‘human touch’ … the experience, empathy and emotional intelligence to know if this will truly help a client achieve their goals in retirement.”

However, Parkin said robo-advice would still play an important role in bridging the advice gap in Australia, particularly as more and more investors used digital advice offerings to improve diversity in their portfolios and reduce some of the risks of large-scale drawdowns.

“One of the things that is great about robo-advice is that it is going to give access to asset allocation and diversification to those who normally wouldn’t have it,” he told financialobserver.

“The test of these [tools] is going to be how they actually act through another event like a global financial crisis within equity or fixed income markets.”

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