The SMSF market would be the next major growth area for robo-advice following the strong global take-up of the wealth management model by sophisticated investors aged 60 and over, according to a new report.
The “2015 Automated Investment Advisers Global Market Review”, released by financial services consultancy FinDigital and robo-advice newcomer Ignition Wealth, revealed that while robo-advice models naturally appealed to younger generations, who had grown up with technology and typically had smaller sums of between $20,000 and $80,000 to invest, robo-advice was increasingly popular with investors aged 60 and over with substantial wealth.
That was because robo-advice models offered greater transparency, control, lower fees, more flexibility and a better customer outcome experience compared to traditional advice models, the report said.
FinDigital managing director Ian Dunbar said robo-advice providers globally were gradually taking market share away from existing wealth management firms, but they were primarily targeting the large number of investors who did not seek financial advice, which included SMSF investors.
“Given the large number of Australians who do not seek financial advice, there’s clearly an opportunity for the local robo-advisory market to develop in a similar manner to countries like the United States and Canada, and parts of Europe, which have experienced explosive growth in the last five years,” Dunbar said.
“Robo-advisers also operate independently from product manufacturers, which is a major attraction for many investors.”
He added robo-advice was not a threat to financial planners who had an ongoing high-touch relationship with their clients, but rather it was a potential opportunity to reach a new audience.
The report, which reviewed 45 robo-advice offerings, mentioned examples where robo-advice models had been white-labelled by financial planning and wealth management businesses.
It concluded “savvy operators were increasingly looking at ways to leverage automated advice to deliver a low-cost, scaled advice offering to the mass affluent”.
The report also said robo-advice was one way to recruit new and potential clients with lower account balances because some providers did not require a minimum investment amount or charged fees once a customer’s account balance reached a certain amount.
Ignition Wealth chief executive Mark Fordree said robo-advice represented the adoption of digital innovation and technology into the advice industry.
“The advice industry globally is merely seeing the same digital trends that have previously disrupted industries such as media and travel,” Fordree said.
“The adoption of technology into the advice industry should be seen as complementary to the existing advice channels, offering the opportunity to lower costs and make advice accessible to more Australians.”
