The uptake of digital advice in Australia is going to be a slow grind if data from the US is any indication, as research from Vanguard has found clients are significantly more loyal to human advisers.
Some 88 per cent of those surveyed that used a digital adviser said they were ‘willing’ to switch to a human adviser in the future, but 90 per cent of human-advised clients wouldn’t make the reverse switch.
Human-advised clients found the financial advice they received added 16 per cent to their wealth, while digital-advised clients received a five per cent value increase.
Clients prefer emotional support
The lack of emotional support from digital advisers is an unreplaceable advantage for human advisers.
Only 24 per cent of human-advised clients would have peace of mind if they were managing their own investments, but 80 per cent do if they have the help of their adviser.
However, it’s a smaller gap for digitally advised clients with 59 per cent confident in their own investing but 71 per cent confident with help from an adviser.
“By their nature financial markets tend to be volatile, which may make investors anxious during market corrections,” the report, co-authored by Vanguard’s behavioural economist Paul Costa and head of investor behaviour Jane Henshaw, stated.
“The vast majority of investors in our sample have peace of mind when investing. This is in large part because they believe that their advisors add emotional value.”
The survey found clients have a preference for human advisers but want their advisers to use digital services to automate portfolio management services.
Not popular here
The Australian market hasn’t seen a significant take-up of digital advice, but the Quality of Advice Review will investigate the regulatory landscape.
Advisers have resisted using it, with ASIC’s consultation paper (CP 332) ‘Promoting affordable advice to consumers’ finding 148 of 215 respondents didn’t provide digital advice citing lack of demand, consumer preference for human contact and regulatory concerns.
“We know that advent of technology in financial advice is going to be gamechanger and a disrupter, but it’s more than just a replacement mechanism for personal financial advice,” financial services minister Jane Hume said at an event hosted by Conexus Financial in January. “We want to better understand how the regulatory setting can be adjusted.”