‘Robo financial advice will replace human advisers’. This is the recurring marketing message amongst robo-advice startups and so far this disruptive marketing message is working well.
In the US, Betterment reported that its assets tripled during the first 10 months to $3B,which is just astonishing and it shows there is a real appetite for passive investing.
But this marketing message may be doing more harm than good to the customers of robo-advice platforms. The reality is the technology behind robo-advice is currently only limited to passive investment management. This is not true financial advice as it does not provide assistance on a customer’s debt, cashflow or retirement planning needs for example.
Nikhil Sreedhar & Schuman Zhang, Directors of ProAdviser, understand this will be a long-term issue and have gotten around this problem in their fintech startup. Dubbed the Uber of financial advice, ProAdviser has a proprietary robo-advice platform that also connects customers to pre-screened financial experts when things get a bit tricky – ie insurance, SMSF, property, retirement.
Tom O’Shea, Director of Cerulli, global research house based on Boston, agrees with this line of thinking and sees “a convergence between the robo-only and traditional human-centric advisors”.
Since robo-advice appeals the most to Gen Y it is important that they understand that robo-advice is only limited to passive investment management. Over the longer term, Gen Y needs to know that insurance, debt, property and retirement are equally as important as investing when it comes to personal financial management.
