Homegrown robo-advice tools targeting Australian industry super funds and their members may be laying the groundwork for greater uptake of broader-based digital advice.
The more than 10 million members of industry super funds are some of the most under-serviced segments of the financial advice market, according to Jeremy Duffield, co-founder of SuperEd.
“We think there are plenty of other solutions to be developed for the affluent people, it’s the mass market of Australians that need advice,” he says.
He describes SuperEd as a virtual advice platform that uses digital techniques to increase engagement, particularly with super fund members approaching retirement.
“We let them know what their retirement prospects are likely to be, to try and engage them, and then help them with retirement income plan implementation,” Duffield says.
His enthusiasm for the project stemmed from opportunities he saw to simplify decision-making. As a by-product of the information age and digital era we live in, “there is so much information out there, people are struggling to make better decisions.”
Duffield, who is also chairman of the Australian Centre for Financial Studies and holds a number of directorships, co-founded the business alongside Hugh Morrow around two years ago, largely because he saw a need for super funds to better engage with their members on advice.
He believes there will be developments in the way advisers use technology in the future. “We’re watching very actively what’s going on in the US, and the development there is just staggering. I think Australia’s been a little slow, but it’s getting there.
While broadly targeted at consumers, SuperEd is also working with a number of industry super funds. Though commercial sensitivities prevent Duffield from naming any yet, he expects to announce some of these partnerships later in the year.
Bright future for BigFuture
BigFuture, an Australian cloud-based digital advice solution that launched only yesterday, is targeting a similar customer base of consumers and super funds.
Chief executive officer, Donald Hellyer, believes super funds are a logical growth market for digital advice.
“They have lots of people with small balances, they don’t have particularly large planner teams.
“You’ve got to have a way of providing ongoing service in a cheaper way. I think they all want to go down this route [of digital advice],” he says, referring particularly to industry super funds,” he says.
Hellyer highlights the data driven aspects of digital advice as one of the key advantages, compared to traditional approaches such as regular advice reviews and seminars.
“It can tell people when something has fundamentally changed with that client. For example, if as a member of a super fund, you get an heritance paid to you…if you have some digital control there which can alert people that your circumstances have changed, then your planner can be so much more proactive,” he says.
Access to BigFuture is provided free-of-charge for most individual users, though a fee of $11 per month is levied on those who have more than 10 bank accounts, or investment accounts, or in excess of five super funds or managed funds.
Hellyer estimates less than 5 per cent of BigFuture’s potential users would opt for the premium category. By mid-afternoon on launch day, he says 100 people had already signed up for the free service.
The United States’ experience
Consulting and research firm A.T. Kearney last month released a study into the adoption of robo-advice services, which it predicts will become mainstream in the United States within three to five years.
Bob Hedges, a partner at A.T. Kearney, says that in the US, consumers are ready for digital interaction with their adviser, “if the price point is so much lower.”
“That’s what is driving it: the reality that the price point can be so much lower, both on the advice part as well as within the underlying products.
“Most of the robo-offerings use [exchange-traded funds] ETFs as the underlying investment, as opposed to a classically actively managed mutual fund, so there’s a big shift in favour of the consumer on that differential as well.
Greater use of digital tools, such as mobile phones and tablet devices, along with access to high speed remote internet, is also part of this.
“We’re in an era now where the relatively digitally sophisticated consumer is paying a whole lot more attention to what things cost, because they’re used to using the internet to be able to do to that, so they can use their digital tools to have a much better understanding of how much they’re paying.
“It’s not for everybody, but it’s for large portions of the mass-affluent market because they’re digitally comfortable with that type of interaction, whereas even about five years ago, they may not have been.
“In the US, a lot of consumers are used to their retirement plan being an investment that they manage online with an occasional phone call, so there’s some training of the population that’s been going on, through their 401k plan.”
