Robo-adviser Six Park is still hopeful that a digital financial advice market can thrive in Australia, even as it shuts down its investment management service.
Six Park CEO Pat Garrett says the cessation of its investment management services, announced in a letter to stakeholders late last month, did not dampen his enthusiasm for digital advice.
“There really is no other way [than digital] to solve for that mass market need for help … on the investment front,” Garrett tells Professional Planner. “I think it will happen and I’m very hopeful it will happen. It’s a question of when and how fast.”
Asked to reflect on the Six Park journey, which started in 2016 with high-profile backing from investors including former Labor Minister for Finance Lindsay Tanner and JPMorgan Australia chairman Brian Watson, Garrett says: “I don’t regret any aspect of it.”
While Six Park will no longer provide advice or investment management services to its clients, Garrett says discussions will continue with entities “that saw the utility” of the service, indicating it may be possible to sell or monetise the intellectual property or technology in the business.
“We believe there’s value there,” Garrett says. “How we might transact [that] is to be determined, but I haven’t given up on it. We had to make a decision about the delivery about the operational side of things.”
Six Park clients will have the option to either sell their assets or transfer to another entity, with the deadline to make a choice being approximately a month. The platform operates on an ASX Holder Identification Number model, meaning clients held beneficial units in the underlying ETFs in the Six Park portfolios.
Garrett says no client money will be lost and the wind-up process would effectively be similar
to when a traditional adviser retires or a practice shuts down.
Professional Planner understands digital advice competitors including Stockspot and Dash have begun onboarding Six Park customers. Financial literacy advocate and adviser Jessica Brady has also stepped in, offering to provide information to Six Park clients about their options in a webinar.
But Garrett says Six Park stopped short of a formal referral or client book transfer deal with any third parties.
“We don’t own clients and we can’t sell them,” he says. “We are accommodating wherever they might want to transfer their holdings or selling if that’s the instructions we get.”
The decision to shut down the service came after it failed to access the “capital and distribution to continue to grow to sufficient scale,” Garrett says.
That is despite having inked white-label partnerships with about 50 financial advice practices around the country.
When Six Park was established, the service was initially distributed via through business-to-consumer channels, then later through business-to-business channels later via small or mid-size partners.
“Our expectations were – like overseas – there would be a level of adoption, awareness and transformation here where larger entities would seek to utilise a service like ours in some way, shape or form to help that solve that problem of accessibility and affordability on the investment management side,” Garrett says.
“We feel like we validated that with consumers and the partners we had, but we wanted and needed larger partners to help solve for funding and distribution and that didn’t materialise in the timeframe we set.”
However, the service was yet to reach the point where banks, super funds or larger dealer groups were willing to adopt it across their whole networks.
He adds that scale was needed to get funding, but funding was needed to achieve scale.
“We got [Six Park] up and running and acquired clients through those relationships and proved the need, utility and receptivity of if it was there, it just needed more scale,” Garrett says.
“We needed funding and scale, it’s a bit of a chicken and egg situation unfortunately, which is part of the challenge.”
Garrett says there was a “risk averse” culture in the local industry that meant large organisations were unwilling to adopt the technology, even if they saw merit in it.
The comments echo those of Abrdn and HUB24, who have struggled to clinch dealer group or practice support for their digital advice joint venture.
They also follow the financial troubles faced by digital advice provider Advice Intelligence, which lost the support of major backer, hedge fund Regal, but was handed a lifeline by software giant GBST, which acquired the firm last month.
But Garrett says local market conditions are still favourable to digital advice over the long-term, and Advice Intelligence founder Jacqui Henderson noted at the Professional Planner Licensee Summit backed having a playing field that is technologically agnostic.
“If you look at the rhetoric around the Levy report and a variety of other slow-moving developments, it’s inevitably going to happen,” Garrett says, referring to the Quality of Advice Review lead Michelle Levy’s recommendations that sought to expand the accessibility of affordable advice.
Garrett also says he is yet to see any data or evidence that suggests passive portfolio construction is falling out of favour or has lost steam.
“We’re seeing more wealth advisers use ETFs for portfolio construction because it’s one of the best ways to deliver value for clients, given that most advisers are now accepting they’re actually not investment managers,” Garrett says.
“What we’re seeing, if anything, is the increased adoption of the use of passive ETFs in portfolio construction which you see in the growth of the market.”
The sale or transition of Six Park client assets is expected to complete within the next month.