The lounge area of Stone and Chalk’s office in Sydney buzzes quietly with the sound of intense activity close by, but unseen. In its meeting rooms, earnest-looking multi-media presentations are in full swing; the coffee machine in the open-plan kitchen is getting a good workout; and on the walls constructed of blackboard material are the chalk-scrawled musings and mantras of self-affirmation that seem to characterise the start-up sector.
There’s a certain, if unspoken, dress code, too: you’ll be out of place wearing a shirt tucked in, and you may actually be denied entry if you’re wearing a tie. Professional Planner is here to meet Paul Feeney, a former financial planner who is the co-founder and driving force behind an online financial advice service. Feeney is renting space at Stone and Chalk, an independent, not-for-profit Fintech hub for start-ups. And we’re here at the suggestion of former Minister for Financial Services and Superannuation, Bernie Ripoll.
It takes something to get Professional Planner to sit down and deal with technology. Generally that’s because we are not well-equipped to assess what’s genuinely innovative and what’s really just a jazzed-up spreadsheet. And if we’re blunt, it’s also because most of the so-called robo-advice services we’ve seen to date are anything but advice services at all; they could be better described as robo-investment services. Their starting point is that the user already has funds available to invest, and they will guide an investment decision. They take no account of what the user might be better advised to use that money for; nor do they pay any regard to investments the user already hold.
The point of advice, surely, is to first assist people to get to the position where they have funds available to invest, having taken into account the other things they can and should do first. An oft-cited example is paying off non-deductible debt before committing to a savings or investment plan.
Not selling anything
So an increasing number of solutions seem to be coming to market that all compete in the same narrow, investment-focused niche. Some are smarter and more sophisticated than others. Some are designed, for example, to dovetail neatly with an adviser’s existing process. They can even accommodate a client’s existing investment portfolio, and provide guidance on how to navigate from where they are today to where they need to be.
But the one thing that unites the majority of them is that at some point in this process they need to sell a product. It might be a portfolio of exchange-traded funds, or other assets, but it’s a product sale, and that’s how they make most, if not all, of their money.
Feeney and Ripoll first met at university and they come into the picture at this point because the service they have joined forces on is a pure advice service. For that reason it may be one of the first true robo-advice services (we hesitate to say it’s actually the first, simply because we have not seen everything).
Feeney hates the term robo-advice, because of the perception that it has been hijacked by the product sales brigade. Ripoll is wary of the product issue for a different reason.
Ripoll led the Parliamentary Joint Committee on Corporations and Financial Services Inquiry into Financial Products and Services in Australia, which led to the so-called Ripoll Report in 2009, and the subsequent development of the Future of Financial Advice (FoFA) legislation.
His work with the PJC, and in ushering FoFA into law, convinced him that many of the ills visited by the financial planning industry on consumers could be traced back to an inability to separate the client’s need for advice from the adviser’s impulse or incentive to sell product, and the conflicts of interest that inevitably resulted.
Furthermore, when advice was not provided in the best interests of the client – when, for example, their full financial circumstances were not factored into advice decisions – it was often a recipe for trouble.
Member for Oxley leaving politics for ‘real world’
Ripoll will not be recontesting his seat of Oxley, in Queensland, at the upcoming election and so for the past few weeks he’s been making the readjustment from the rarefied atmosphere of politics back to what is sometimes referred to as “the real world”. On June 1 he will formally join the board of Feeney’s business.
Meanwhile, Feeney’s decision to plunge into the world of online advice was spurred by an innate entrepreneurial spirit, fuelled by his experience as a working financial planner, providing face-to-face advice to clients. Feeney recognised that in many instances the job of the financial planner was no more than that of a glorified product salesperson – and sometimes not even all that glorified.
Feeney set out just over 12 months ago to create an online advice service that has no links to product or sales. He swears that his service, Map My Plan, will never sell products – not even risk products. Nor, he says, will he establish an administration or fund aggregation service on which he can clip the ticket.
Feeney is selling nothing but advice. In fact, he’s not really even selling it: for the first 10,000 users of the service, it’s free and will remain free. After that, the online component remains free, and any user who wants to interact with a human adviser by email can do that, as many times as they want to in a year, for $9.90 a month. That’s Netflix territory.
Users can also have two one-hour phone appointments with a human adviser each year, and pay just $29 a month. That’s basic Foxtel territory.
When Feeney moves into the white-labelling space – working with entities such as industry funds, employers and established advisory businesses – those entities will be charged $50 per user per year, and those users can take advantage of the email service.
It’s still early days, but it might just be that the era of true robo-advice is dawning.
