The purported rise of robo-advice has been a disappointment according to advisers, with 87 per cent of respondents indicating its effect has been negligible in a recent Professional Planner survey.
The vast majority of respondents to the poll – which asked ‘what level of impact has robo-advice had on the industry in the last five years?’ – said the effect has been ‘underwhelming’ and ‘marginal’, while the rest described the effect as ‘significant’ and ‘impressive’.
The term robo-advice is a contentious one. At its narrowest definition, it’s simple auto-investing. More broadly, it can encapsulate every tech-enabled advice tool from investment platforms and document templates, to compliance checkers, budgeting apps and retirement calculators.
While some of these tools have developed rapidly – the evolution of platforms and managed account capabilities, for example, has revolutionised advice-led investing – the consensus is that robo-advice hasn’t delivered to expectations.
Advisers largely use the same templates on their CRM – typically Xplan or Coin – to create client documents they were using a decade ago. Back end compliance checking tools that use native language generation to scan documents for regulatory keywords are clever, but the uptake has been minimal. Consumers, for their part, are generally wary of investing their funds using investment aggregation ‘portfolio builder’ tools.
Robo has been pitched as the saviour to an industry drowning in compliance and striving for efficiencies. Instead, as one licensee head said recently, it’s been a “damp squib”.
“We certainly agree,” says Ashleigh Swayn, co-founder of Absolute Advice. Swayn provides a low-cost, largely robo-enabled advice service and is well aware of the technology’s limitations.
“The current advice technology tools available in Australia will need to evolve or risk being replaced with overseas solutions,” he says.
In June, Swayn explained that while the technology associated with robo-advice enables his business, the nature of our retirement system nullifies its growth and development.
“Robo’ can’t really exist well in Australia because most of the money is in super,” he told Professional Planner. “It worked in America but they don’t have a big retirement system like we do.”
Certainty Advice Group managing director, Jim Stackpool, agrees that real game-changing technology has been slow filter down to advice. “It’s been a trickle,” he says. “I don’t know what it’s going to take for innovation to take off. The first ten years… nothing… you can’t even see it.”
Stackpool warns, however, that a wave of significant technological advancement is on the horizon, and advisers that aren’t open to it may fall by the wayside. He points to the impact of music streaming service Spotify and the proliferation of people eschewing accounting services and filling their own tax returns online as precedents.
When game-changing robo-advice comes, he says, advisers will need to be ready. We all have “natural belief mechanisms” that keep us doing what we’ve always done, Stackpool says. These will need to be overcome if advisers are to survive the advice industry’s eventual “Spotify moment”.
Despite the negative consensus, there are members of the advice community that believe robo-advice has had a significant impact. Anne Fuchs, head of advice and retirement at Sunsuper, says the idea that robo-advice has been underwhelming is “rubbish”.
“The tools are absolutely there,” she says.
Fuchs points to financial roadmap tool Map My Plan as an example of robo-advice that is both effective and popular. If advisers think robo-advice has been underwhelming, she says, it’s probably attributable to a “disconnect” in their business model.
More education is the key, Fuchs says, to getting both advisers and consumers interested in advice technology. “We have to create more demand,” she says. “It’s not going to happen without more education.”