Advisers Un-phased by Robo-Advice

The majority of financial advisers are not worried about the advent of ‘robo-advice’, a study by Midwinter has found.

Julian Plummer

Midwinter Managing Director, Julian Plummer

The Midwinter Robo-Advice Survey asked advisers about their understanding and attitude towards robo-advice, ie: the automated delivery of financial advice to consumers. 43% of those surveyed said they were aware of robo-advice and not concerned about its potential to disrupt the advice industry. A further 12% said they were excited by its arrival.

Midwinter’s study also revealed that 45% of advisers viewed robo-advice as a technology tool for advisers, rather than as competition, although only 11% said they had taken robo-advice into account when building their business strategy.

However, advisers were divided on whether robo-advice would generate more client leads. Just over one-third (37%) of advisers said they believed robo-advice would increase the number of clients seeking a relationship with an adviser, compared to 28% who believed it would decrease the pool of clients. The remaining 35% of survey participants were unsure what the impact of robo-advice would be.

45% of advisers viewed robo-advice as a technology tool for advisers

Asked to identify which clients would be likely to use robo-advice, most advisers said it would appeal to Gen Y (born between 1980 and the early 2000s) and Gen Z (born from the mid-2000s onwards). Less than 10% of advisers believed robo-advice would suit Gen X clients, who are currently in the mid-late stage of their careers, and often have children at home.

Looking ahead to 2020, most advisers believe that robo-advice will account for 10-30% of financial advice in Australia. But respondents also believed that only simplistic areas of advice could be automated and that clients would still prefer human involvement for the majority of their advice.

Commenting positively about the application of robo-advice, one survey respondent said: “This will be a wonderful tool to assist planners deliver advice at a lower price point to clients who either cannot afford, or are resistant to, the fees a planner will charge for a comprehensive plan. Most suited to the middle market mums and dads who have fairly simple needs, it will be a valuable tool for my business which is predominantly in the accumulator segment.”

In contrast, another respondent warned that robo-advice would rely too heavily on disclosure and put clients at risk: “I feel that Robo-Advice will lead to a percentage of clients thinking they can DIY and paying the price by not having good investment and tax strategies in place to enhance their financial position. In the long run I think that many will regret using it. Just like the home handyman (‘s wife) usually regrets not using a qualified tradesman.”