Introduction

Midwinter’s “Robo-Advice Survey” was comprised of responses from over 288 advice professionals, representing over 65 licensees.
The “Robo-Advice Survey” took place between 26th February and 5th March 2015 and was specifically designed to target financial advisers & licensees.

We do ask that if you make reference to this survey, please refer to it as the Midwinter Robo-Advice Survey.

 

Background

Midwinter is currently developing a range of Robo-Advice modules for advisers, platforms and licensees to use across their advice networks.  The Robo-Advice modules will be fully integrated with Midwinter’s AdviceOS financial planning software. Clients and prospects of advisers using AdviceOS will be able to offer self-generated advice via Robo-Advice modules, primarily in the portfolio review, accumulation and retirement areas.

We believe we have an advantage over other software providers as our cloud based AdviceOS platform provides a unique tool to monitor client initiated Robo-Advice.

Midwinter is currently also in discussions with a number of third party platforms interested in providing Robo-Advice modules themselves. Our intention is to integrate the AdviceOS platform with select Robo-Advice providers using API technology.

We are also actively seeking third parties interested in integrating our Robo-Advice modules with registry systems. This integration will allow straight through processing and automatic implementation of the advice generated by our Robo-Advice modules.

 

Objective

In anticipation of the release of our Robo-Advice modules, we undertook a comprehensive industry survey of advisers to explore the attitude of Robo-Advice on their businesses. This industry survey was designed to obtain the opinion of planners at the coalface rather than the opinion of lawyers and compliance personnel.

 

Survey responses

What types of planners were surveyed?

 

whattypeofplannersweresurveyed

Background of the survey participants – reaching a broad section of the adviser community.

Given the industry survey was to ascertain adviser’s attitudes towards Robo-Advice, it was important to understand the type of financial planner being surveyed.

 

How many years have you been with your current dealer group?

howmanyyearshaveyourbeenwithyourcurrentdealergroup

 

What sort of advice do you currently provide?

 whatsortofadvicedoyoucurrentlyprovide

The majority of advisers (84%) surveyed offered comprehensive planning services, with only 10% offering scaled advice-only solutions.

 

How familiar are you with the concept of Robo-Advice?

howfamiliarareyouwiththeconceptofroboadvice

The concept of Robo-Advice has unquestionably entered into the mainstream industry conversation, with 79% of advisers surveyed being familiar with it. Only 21% of advisers were unfamiliar with the concept of Robo-Advice.

 

What is your overall attitude towards Robo-Advice?

whatisyouroverallattitudetoroboadvice

The majority of advisers (55%) surveyed were aware of Robo-Advice and not concerned about its potential to disrupt the advice industry, with 12% of these advisers actually excited about its arrival.

Around a quarter of advisers were aware and concerned of the impact of Robo-Advice on their business. Only a small amount of advisers (5%) considered themselves apathetic towards the rise of Robo-Advice.

 

Which client demographic do you believe will be most inclined to use Robo-Advice?

whichclientdemographicdoyoubelievewillbemostinclinedtouseRA

Just under half of advisers (48%) believe that the Gen Y demographic is most suited to Robo-Advice, followed closely by Gen Z (42%).

Surprisingly, less than 10% of advisers thought that Robo-Advice would be suited to Gen X clients.

There are two factors at play here, firstly the likelihood of each demographic to be at ease with robo technology, and secondly, the relative investing power of each demographic. While generation Z’s disposable investable assets are still relatively low, advisers understand that their willingness to use technology to manage their financial affairs leads to a strong belief that Generation Z is suited to Robo-Advice.

 

Which client segments do you believe will be most inclined to use Robo-Advice?

whichclientsegmentsdoyoubelievewillbemostinclinedtouseRoboAdvice

This confirms the widely held belief that Robo-Advice will be implemented at the Bonze and Silver client segments. Less than 9% of advisers surveyed thought that Robo-Advice would be used by their gold and silver clients.

 

Do you think ASIC should have special legislation for Robo-Advice?

DoyouthinkASICshouldhavespeciallegislationforRoboAdvice

The majority of advisers (52%) polled, thought that ASIC should intervene and limit the scope of Robo-Advice in some form.

The percentage of those that thought that the scope of Robo-Advice should be limited by ASIC was fairly evenly split between limiting Robo-Advice to non-product advice only, limiting to RG200 scope only, and limiting to intra-fund advice only.

 

Do you believe Robo-Advice will increase or decrease the number of clients that seek advice from advisers?

DoyoubelieveRoboAdvicewillincreaseordecreasethenumberofclientsthatseekadvicefromadvisers

These results indicate the potential of Robo-Advice to polarize the planning community.

A plurality of advisers believed that Robo-Advice will actually increase the total pool of people coming to see them for advice. 37% of advisers thought that Robo-Advice will increase client numbers by increasing participation rates from silver and bronze clients, and potentially escalating them to full advice if appropriate. This is potentially a good sign for the burgeoning Australian Robo-Advice industry – if advisers believe in the potential of advice escalation, this indicates their intention to work with the concept of Robos rather than fight it.

However, 28% of advisers through that Robo-Advice will result in a reduction in clients seeking them out for advice, as Robos eat into the lower end of their client base.

 

If you implemented Robo-Advice, would you want to charge clients for this self-help advice?

IfyouimplementedRobo-Advicewouldyouwanttochargeclientsforthisselfhelpadvice

Of those advisers considering implementing Robo-Advice, 51% intended to offer it for free or at a discounted rate. Only 20% of advisers thought that it would appropriate to charge clients for Robo-Advice.

 

Has the Concept of Robo-Advice come into your business strategy as yet?

hastheconceptofroboadvicecomeintoyourbusinessstrategyasyet

Unsurprisingly, the overwhelming majority of advisers (71%) have not yet considered the impending Robo-Advice services into their business planning. 11% of advisers have taken into account the rise of the Robo when it comes to their strategic business planning. While it is clear that advisers are taking Robo-Advice seriously, there is still clearly a lot work for advisers to do when it comes to positioning themselves strategically against potential Robo-Advice competitors.

 

Do you believe that Robo-Advisers are going to compete against advisers, or be a technology tool for advisers?

doyoubelievethatroboadvisersaregoingtocompeteagainstadvisersorbeatechtoolforadvisers

Around one quarter of advisers expressed still being unsure as to whether Robo-Advice would be a competitive threat, or a competitive boon to their business.

45% of advisers thought that Robo-Advice would ultimately be used as a tool for advisers instead of seeing it at as a competitive threat.

One thing is certain from these numbers – advisers are already taking the challenge – or opportunity, very seriously.

 

Which of the following reasons is most likely to be behind the success of Robo-Advice?

 WhichofthefollowingreasonismostlikelytobebehindthesuccessofRoboAdvice

Advisers thought that if Robo-Advice were to succeed in Australia, it would be because it is a good fit for those with simple financial circumstances, or because it will be a good match for those comfortable using online tools.

 

Which of the following reasons is most likely to lead to the failure of Robo-Advice?

whichofthefollowingreasonsismostlikelytoleadtothefailureofroboadvice

Advisers who thought Robo-Advice would not be successful, cited their main reasons as – people being uncomfortable with wealth management and requiring personal guidance, and Robo-Advice being unable to give accurate advice as their client’s circumstances become more complicated.

 

Who do you see best placed to create a Robo-Advice system?

whodoyouseebestplacedtocreatearoboadvicesystem

Unsurprisingly, most advisers see financial planning software companies as the organisations best placed to create a Robo-Advice system. Financial planning software providers are in a position to be able to leverage of the current advice systems, workflow engines, PlanBuilders, data feeds, product replacement and portfolio review modules. Clients originated through a Robo- Advice module will be accessible via the financial planning system for later potential escalation to comprehensive advice.

Only 22% of advisers thought larger enterprises such as banks to be best placed to create a compelling Robo-Advice tool.

In contrast to the American model, where many practice/advice firms are developing their own robots, only 2% of Australian practices see themselves to be placed to develop their own robot.

 

Overall, do you see Robo-Advice as an exciting opportunity or threat to your business?

Overalldoyouseeroboadviceananexcitingopportunityorthreattoyourbusniess

Contrary to the negative commentary seen in various media outlets of late, the majority of advisers are not seeing Robo-Advice as a competitive threat. Over two thirds of advisers see the rise of Robo-Advice as an opportunity to increase the amount of Australian seeking advice.

 

If some of the major Australian banks are developing Robo-Advice, do you think you will lose clients to these robots?

Ifsomeofthemajoraustralianbanksaredevelopingroboadvicedoyouthinkyouwillloseclientstotheserobots

Advisers remain largely unconvinced of the impending threat of the large banks developing Robo-Advice. Only 20% of those surveyed believed that robots backed by the large banks would have any impact on their client base.

 

If you had access to a Robo-Advice function, would you promote its use to your clients?

ifyouhadaccesstoaroboadvicefunctionwouldyoupromoteitsusetoyourclients

A surprisingly high number of advisers would promote the use of robots to their clients.

Of the advisers surveyed, 30% of advisers would activity promote the use of a Robo-Adviser so their clients see they are keeping up with the latest technology. 52% said that they wouldn’t overly promote the use of Robo-aAdvice, however they would let their clients know that it would be an option for them if desired.

 

What percentage of advice do you believe will be written by a Robo-Adviser in the year 2020?

whatpercentageofadvicedoyoubelievewillbewrittenbyaroboadviserintheyeartwentytwenty

A clear majority of advisers believed that by 2020, Robo-Advice would responsible for around 10-30% of financial advice generated in Australia.  These advisers believed that only simplistic areas of advice can be automated and clients will still prefer human involvement for the majority of their advice.

 

 

Survey Participants’ Comments

Positive Comments

  • Adding robo advice to the client portal of Midwinter AdviceOS would be an asset.
  • Robo Advice will be helpful for a small segment of younger clients that would otherwise not seek advice. This is a positive outcome. There will however, always be the need for financial advisers to provide discipline and certainly for clients who have financial complexity.
  • I see it as a good tool for teaching financial literacy and providing a service to clients unable to afford a planner.
  • This will be a wonderful tool to assist planners deliver advice at a lower price point to clients who either cannot afford or are resistant to the fees a planner will charge for a comprehensive plan. Most suited to the middle market mums and dads who have fairly simple needs. It will be a valuable tool for my business which is predominantly in the accumulator segment.
  • I think it would more likely be a spring board to engaging with a planner directly.
  • Bring it on – if there is a cheap way to make consumers start thinking about their finances, this will just make the pool of people that will need high end formal advice larger in the long term.
  • I wait to hear all the facts from Julian.
  • The limiting factors are: ability of software designers and programmers to keep the complex simple; and handling the interaction of behaviour and complexity (the logical solution is not always the one that is right for that client). I look forward to this tool filling the gap for simple one-off questions and to then steer (perhaps after disappointments) the more complex clients to me where my mix of technical and human services under a holistic format will find ready arms.
  • I think for those self-directed investors who see no value in advice, this is a great solution.
  • Robo-advice cannot replace the intuitive thinking of an experienced financial adviser. It is valuable to engage the younger tech savvy audience who currently have little engagement with financial planning advice and have little or no interest or engagement with assets like superannuation. Therefore it is a valuable tool to tap into new markets and create clients for the future through education and simple transactional pieces of advice.
  • Looking forward to innovation in this area.
  • Could be a good fit for low value and simple needs client and help maintain contact.
  • FOFA has already priced a number of consumers out of the market who seek and need advice yet can’t afford to pay what we charge due to the advice process that needs to be adhered to (e.g. simple super consolidation). We simply don’t deal with this client. Robo-Advice has a place for this consumer.  It remains to be seen for deeper advice offerings whether accountability, sticking to a plan, catering for change etc can be accommodated through an automated service. Anyone/thing can produce a report.
  • Know very little about it. FP is a relationship business for those that value a relationship. For those that don’t maybe it will be suitable and that should not be seen as a threat. Maybe it will provide a cost effective way to provide advice to this group??
  • If done right it will be a great benefit to small to medium practices to take on more clients.
  • I simply do not understand the fear the industry has about Robo-advice. Technology generally rises up to fill a void, and we (the financial advice industry) are not getting to every Australian and the process is clunky and manual. I believe robo-advice models will provide us with fabulous insight into where we can be far more efficient in the provision of advice, with the end result being a hybrid of the two – personal and tailored advice assisted by cutting edge technology.
  • I think there may be a place for Robo-Advice if it gets people in general to focus on their financial affairs and set targets.
  • Provides a fantastic opportunity to create an electronic ecosystem that covers all of a client’s financial solutions in one area, there are simple advice areas that are not commercial to do face to face.
  • I think robo advice delivered across the full spectrum of advice and portfolio management will succeed. It will cause a fee reduction across the younger age groups. I.e. gen x and y. However for me, this is a way to scale advice to those groups that I can’t do at the moment. I would be very keen to see what Midwinter has planned in this space and possibly integrate it into my practice.
  • If Robo advice can engage more consumers ie. grow the number of people that use advice then there is greater opportunity for these people to be engaged by a personal planner. If Robo advice is developed as a distribution channel for insto’s then these people may be future opportunity for non-aligned IFA’s and Independent (fee only) Advisers.
  • Implementation is key to success. Planning Businesses / licensee’s need to CLEARLY define the scope and handover points (where Robo-Advice no longer is appropriate).  This, done well, has the potential to be a great tool in the future.
  • Midwinter should look to develop as it already has many of the modules, just needs to simplify its offering and make available on client portal.
  • Can’t wait for it.
  • Affordable advice for more Australians – that’s a good step.

 

Negative Comments

  • If people trust robo advice they may as well do the same with a doctor, lawyer etc, maybe the world will be so impersonal that it will become like that.
  • In a world where planners’ ethics are questioned by journalists, politicians and competitors running industry funds, isn’t it great that consumers can bypass this budding profession and do it themselves – of course once they’ve done all their research, they may want someone to cast their eye over it and give them a tick of approval – but that won’t require much time nor cost – NOT! Regulators should come down on any provider of robo advice with stringent regulation – and consequences – such that they are held liable for losses by consumers who misuse the software – that can’t be disclaimed away by online terms and conditions that are ticked off simply to progress to the next step.
  • As Advisers we need training and qualifications and on-going CPD points to give advice – I want Robo advisers to have same qualifications before advice (if not they can direct general advice ) The whole point of training and qualifications means nothing with Robo advice.
  • It won’t work. No personal touch. Can’t disseminate other aspects re life goals/ aspirations etc.
  • We have Robo-advice now for most professions – it is called Google. Everything you need to know is on the web, budgeting tools, medical advice, wills etc.  Why do people pay for advice – it isn’t to get a computer generated response.  Consumers don’t even like voice response.
  • People still fear money, finance and making decisions about such things. Robo-Advice can’t give them confidence in what they’re doing like a good financial planner can when taking them by the hand and going on their financial journey with them. Having access to a professional for support, counseling, and guidance is why robo-advice is not a threat. Beyond this, robo-advice won’t be able to adjust a plan for clients individual emotional capacity.
  • So who goes to jail when they get it wrong? Will the Ombudsman question the Robot before turning off its power supply? Isaac Asimov missed this one.
  • Where does the responsibility lie when a person (I will not call them a client) is dissatisfied with the advice from the robot that has caused action by that person resulting in a bad outcome. Who does he sue?
  • Robo-Advice can’t account for the human side of advising.
  • I hope this is a joke. With ALL of the regulatory restrictions placed on advisers, it is hard to see SIC allowing anything which would be called personal advice to be done robotically.
  • It will not be able to provide forward thinking strategies and is probably best in the Industry Super space where there is no real advice anyway.
  • As an independent relationship based adviser it is a concept that I very much need to be aware of and be able to contrast myself against.
  • A huge problem for human contact Advisers.
  • Online tools are useful, but do not manage the behavioural issues that clients need most help with.
  • It is a bit like the driverless car, totally out of someone’s imagination and totally impracticable. I have no doubt ASIC and the rest poking into our business will find a way to justify it.
  • This is a potential game-changer. However, the ‘Robo-Advice’ which already exists around portfolio management is only the tip of the iceberg. Software has the potential to undermine the process of advice delivery to most of the market.
  • Yet to understand how robo-advice is allowed, given that it’s a product push. Case in point being articles written in newspapers that denounce advisers, and then advertise an online offering with a 1.10% admin fee.
  • Every business is under threat even Midwinter. But we need to learn to turn these threats into opportunities.  This is how it is in every business and every industry with the change we see in the world today.  Sales are about trust and customers do not entirely trust everything that is online.
  • Low value planners beware you will be replaced by rules driven software. Rollovers, contribution optimisers and simple savings plans will be done by clients themselves using these tools.
  • With the media attention on the Banks and ASIC for lousy advice and lack of compliance, I don’t think that Robo-Advice will take off with such gusto given that compliance will be a major issue. Who will accept responsibility for a bad outcome of cheap advice? The media and their journos will have front page articles galore if it goes wrong.  And ASIC won’t keep up with it.  What systems are employed in a practice for Licensees to monitor the files and audits? Great idea for a shortcut but we are dealing with people’s money.
  • From my understanding this is little more than enhanced index investing. As I do not believe indexing is a stand-alone investment solution, it is of little interest to me. Moreover, the algos appear pretty limited in terms of providing strategic advice – getting your hands on a pile of bricks doesn’t mean you can build a house.
  • Politicians and ASIC have made it too expensive for many young people to engage a financial planner and build a trust based relationship. This is driving the next generation into robo-advice, which is a poor option as a machine can’t perform a true needs analysis or understand the nuances of client goals and behaviour. The medical professional is seeing the same trend with on-line self-diagnosis or remote diagnosis, which has the same shortcomings. Computers do have their limits. Many people will get burnt before consumers realise this and ASIC, as usual, will do too little too late. I would like to see the FPA get involved in this debate and sell the value of an advisory relationship more effectively.
  • Recently I needed a personal trainer. I tried using some robot based systems, but they were kind of useless.  I found talking to a real personal trainer so much better.  And I read Men’s Health, so I know a bit about it.  I think Robo Advice is a bit like that.  Also the calculators that I have seen (to date) have been very prone to error, and very susceptible to small changes in assumptions.
  • Portfolio management and investment advice is about where I see Robo-Advice fitting in. Financial planning is so much more than that. Strategy is what drives successful financial plans and I can’t see Robo-Advice dealing properly with strategy.
  • Robo-Advice will not have the psychological benefit that good planners bring. A lot of financial decision making is not about the actual $$ but the way people feel about the $$ and the decisions.  Also a lot of the work planners do is strategy work – assessing the outcomes of different strategies.  Not sure how this will be achieved with the Robo- Adviser as lots of people aren’t aware of the different strategies available.
  • I feel that Robo-Advice will lead to a percentage of clients thinking they can DIY and paying the price by not having good investment and tax strategies in place to enhance their financial position. In the long run I think that many will regret using it. Just like the home handyman (‘s wife) usually regrets not using a qualified tradesman.

 

Miscellaneous  Comments  

  • Still to see if the complexity of people’s situations and needs can be even remotely addressed rather than indicate to people that they need to talk to an adviser as advice is not a simple matter that a few questions and answers can adequately address. Existing systems have their issues and they don’t purport to give advice, just some information and more work is needed by the adviser to fashion the right advice for a client
  • It’s an ever changing world with technology changing at a rapid rate. Financial advice is no different.
  • It will primarily cater to cost conscious clients.
  • Should be limited to simple non-complex advice and heavily monitored by ASIC as this will become the next product flog by institutions with ridiculously high and hidden fees and lead to further bad press for our industry as it is not a strategy solution.
  • I think you need to make the separation between full service financial advice and scoped advice and the impact that robo advice has on these areas – look to the US and the success with Robo advice re Wealthfront, Betterment and Learnvest – all companies who have built business models over old transactional advice areas.
  • Time will tell.
  • Not sure what this is all about, hence some of my answers are probably wrong.
  • I can see Robo advice being provided by the big institutions as this is where they are heading now for turnover and minimising costs at the expense of looking after their clients overall situation virtually like a banking product.
  • We are working on some automated systems for client contact. The issue of robo advice is one where I suspect the less complicated client may find themselves looking. I am unsure how the process will play out, but I suspect that this is NOT the answer to the underinsurance issue in Australia.
  • Product advice is only part of the solution but a huge part of the industry & media focus on this. The critical aspect of financial success has to do with the individuals own attitude and actions/reactions and this is a contact sport between a client and their trusted adviser.
  • For a full service Wealth Management firm, Robo-Advice has no place in our value proposition to clients. A client that would seek automated advice is very unlikely to be an ideal client for our firm.
  • I heard NAB talk about this previously. It seems that it will target simple product replacement but I feel that one or two court actions will step robo advice backwards.  Eventually in the next 30 years it will become much more commonplace.
  • I still think it’s at least 5 years away from having any impact. Until FOFA is sorted, it won’t be effective enough to provide any advice.
  • Robo- Advice is a disparaging and negative tag. Do you have a bias against use of technology? (Editor-no we don’t)
  • Will ASIC and politicians see it as a panacea to the ills they perceive in the advice industry today? As an algorithm has no emotions it cannot be motivated by greed and so will not rip-off grannies (can’t make her a cup of tea either).  I feel politicians will opt for a cop out on this and robo-advice will be given exclusions from certain regulations.  Robo promoters will adopt the Uber taxi model and effectively challenge legislators to accommodate them rather than robo-advisers toeing the line that existing advisers must follow.
  • As the profit motive has all but killed off genuine customer care, this will probably be developed and promoted heavily because it fits so perfectly with the focus of banks: drive down the cost of transaction to maximise margin. Good planners will find and keep clients who appreciate real service from a real person who sits down and works through complex issues and options with them over a coffee. Robo is coming but he ain’t no Terminator!
  • This will need to be a well governed and legislated area in light of FOFA.
  • Effectively for more simple type of advice a Robo-Adviser may be appropriate, however more complex advice does I believe require a more face to face with a planner. It may for example be used where clients require little maintenance. They are similar concept to ATM’s in that things become automated. Baby Boomers I don’t think would be too happy with this.
  • Technology and disturbance is happening in EVERY market.
  • Let the market decide what it wants and which direction it wants to go.
  • You can’t replace a relationship with a machine so it will divide those who want a cheap low end solution and those want a high quality high touch service. It will be strongly adopted by the large product manufacturers who have been shown to be incapable of providing advice and don’t value it themselves. It will provide leverage for the large product manufacturers to reduce the cost of their distribution over time.
  • I believe that the biggest area will be in product sales.
  • I would look for Ubank, ING direct and Xero to bring something out like this.
  • Heightens awareness of the need for quality advice.
  • It will need to be broken down into small scoped module, include a little educational material and need to be flexible enough in options to suit a wide range of clients.
  • I use Robo-advice in my business now for Budgeting and Cashflow management. In general, though, I am in the ‘personal reassurance’ business and Robo-advice can open doors. But would you write the provider a cheque for a product? It could work well for Intrafund investment selection if you are on a super platform already.
  • Not too sure how it is going to affect the advice business. I can understand the reason for development and considering the younger generation will be more tech savvy.  A possibility which could assist current planners would be a referral basis.  The first contact could be the robo adviser and for more complex decisions it could refer to an adviser. Interesting!
  • It may be a bit like online and Bank teller sold Life insurance. There will always be a part of the market who believe they can do better themselves (and save money) and they are not the market we should be looking for. It will not appeal to those who want to maintain a healthy relationship with a trusted adviser. As long as ASIC get the playing field level – they have not managed to it yet!

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