The findings of the Royal Commission into Misconduct in the Banking, Superannuation and Financial Services Industry could play into the hands of robo-advice, reckons Ted Richards, the former AFL great turned director at Australian robo-advice platform Six Park Asset Management.
“The royal commission has been sad for certain parts of Australia, but a fantastic opportunity as well,” the former Essendon Bombers and Sydney Swans player says. “We’ve been able to receive a lot of attention off the back of the (Hayne) inquiry.”
Richards expects Commissioner Kenneth Hayne’s report and its ramifications to upset the traditional advice delivery model.
“Robo-advice really grew in the US on the back of the financial crisis in 2008, where there were people overpaying for underperformance,” Richards says. “There wasn’t that real shake-up in Australia, with banks being quite resilient at the time, and we think this royal commission could be the shake-up in the industry that the US experienced a decade ago.
“We think it will create an awareness of what people are paying and what they’re getting in return.”
This doesn’t mean the adviser will disappear altogether, Richards says, and in some cases planners will be able to use robo-advice to attract more clients and upscale them.
“I don’t think robo-advice is going to be everything to everyone,” he explains. “But I look to the US, where it’s very entrenched, and it certainly can complement what the adviser does. It has the ability to attract and engage potential clients at a lower price point than what a human adviser might consider a potential client.”
Six Park, for example, is looking to produce a business-to-business, white-label robo-advice product that advisers can use to attract clients in their own practice.
“This can increase the number of clients into their sales funnel and when those clients have an investable amount, they become a premium client, or that face-to-face client,” Richards says.
Many advisers report an interest in robo-advice from their clients’ children, he adds, who may not have as much money to invest.
A Six Park client needs a minimum of $10,000 to invest (the average is $80,000). After they fill out a risk-assessment form to create a risk profile, they are given recommendations across one of five portfolios covering seven asset classes – Australian equities, international equities, emerging markets, infrastructure, property, bonds and cash.
Richards says most returns have been stellar – over the last 12 months, for example, the growth portfolio has hit 14.5 per cent – but declined to reveal total funds under management.
In addition to automating tedious planning tasks, the big appeal of robo-advice is its ability to remove investment bias, Richards says.
“We had a lot of people wanting to talk to us about Bitcoin and we just had to remind clients that it’s outside our circle of confidence and to stick with a plan and with the process,” he says.
“Because that stable track record is what works.”
Richards has been immersed in the world of robo-advice for just over a year but a career in finance was brewing even in his footy heyday.
“I grew up in Melbourne and possibly one of the first items I wore was an Essendon football jumper, so footy was a big passion,” he says. “But I was always aware that a football career was finite, so I was smart enough to know that it would end one day.”While still playing professionally, he completed a bachelor’s degree in commerce and a master’s degree in applied finance.
“I started investing myself – to mixed results,” he says.
Richards worked at Citigroup for two years in institutional sales, before moving to Airlie Funds Management, working under John Sevior, where he learned equity analysis.
“I quickly realised that if I wanted to learn about investment, I needed to move over to the buyer’s side,” he recalls. “I also saw some of the investment decisions my teammates made based on poor advice or no advice, and thought, ‘There is a real opportunity here to move into providing good advice.’ ”
So how does working at the helm of robo-advice compare with the rush of chasing the Sherrin?
“I think a footy field is a footy field and there is an adrenaline rush you get in front of 100,000 people that is hard to replicate,” he acknowledges. “But I love what I do. I love investing, I love the psychology of investment.
“Without getting too romantic, helping people improve their quality of life gives me a big amount of satisfaction.”