Robo-advisers will have the greatest impact on the financial services industry in the short-to- medium-terms, according to a member survey titled Fintech Survey Report by CFA Institute, the global association of investment professionals.
An overwhelming majority of 70 per cent of respondents considered that mass affluent investors will be positively affected by automated financial advice tools in the form of reduced costs, improved access to advice and improved product choices.
The Fintech Survey, which measured the opinions of CFA Institute members globally, found it unlikely that automated financial tools will replace engagement with human advisers for high net worth and ultra-high net worth individuals. The implication is that the tailored nature of financial advice to these market segments is not as easily amenable to standardized automation tools typically provided by robo-advisers. These groups of investors, with large portfolios and potentially diverse and complex investment needs, are likely to continue to favor personalised human advice.
Respondents are most divided about the impact of financial advice tools on market fraud/mis-selling and on the quality of service, with a roughly even split between respondents who believe that the growing prevalence of financial advice tools will exacerbate or diminish market fraud and mis-selling. However, investment professionals made it clear that flaws in automated financial advice algorithms could be the biggest risk introduced by robo-advisers (46 per cent of respondents, a plurality), followed by mis-selling (30 percent) and data protection concerns (12 per cent).
Additionally, the survey addressed the impact of blockchain technology, the distributed ledger underpinning virtual currencies. The technology is being explored by financial services firms. The survey revealed that members believed clearing and settlement, alternative currencies and commercial banking are the top three areas most likely to be impacted by blockchain technology.
Mr Anthony Serhan, President CFA Society Sydney, said CFA’s recent ‘Investor Trust Survey’ showed that trust was a big factor for Australian retail investors.
“Generally, trust has somewhat stabilised in the industry particularly where there is a personal recommendation by someone else the investor trusts,” he said. “The question this Survey raises is whether robo-advisers offer the level of trust needed to engage retail investors,” he said.
Mr Serhan concluded: “Fintech is attracting increased attention from consumers, investors, the investment management industry and regulators across the globe but there are definitely unresolved issues. CFA’s survey confirms the belief that rapid technological innovation has the potential to shape and even disrupt the asset management industry however industry is not yet convinced that investors will be made unambiguously better-off.”
