Algorithms giving financial advice? It would be better to get used to it
Shane Hancock, head of advice and education at AustralianSuper, says digital advice may have a role to play as technology improves. However, there would likely still be “human engagement with digital guidance” to give people more confidence when making important decisions.
“We estimate that around 250,000 Australians will retire in the next few years and over 30,000 of them will be members of AustralianSuper,” Hancock said.
“This large increase in the number of retirees will lead to a corresponding need for affordable, quality advice, and digital advice has the potential to provide a valuable service to people who need advice quickly and easily.”
UniSuper’s managing director of financial advice, Graham Eggins, also said he will “look closely” at digital advice.
Eggins says making advice affordable and accessible are key goals for UniSuper, and he plans to finalize a digital advice strategy in the next fiscal year.
“For us, digital advice is more than just robo-advice – it also includes using technology to deliver advice more effectively and digital tools to drive greater advice engagement among our members,” says Eggins.
Healthcare industry fund HESTA launched automated general advice last year, and it says the service has been used by more than 100,000 members.
Managing Director Debby Blakey said HESTA is also working to do more with digital advice.
“We continue to develop our digital advice offering based on what our members have told us about their needs – this is primarily related to their transition into retirement,” says Blakey.
Today, robo-advice generally focuses on fairly straightforward investment matters, such as assessing a client’s risk appetite and then recommending an appropriate set of exchange-traded funds. It can also be used for “general advice” that is not specific to a member’s situation, such as telling someone how much they might need to contribute to reach a retirement goal.
However, abroad, digital consulting is more advanced and moving towards more complex areas. Some believe it is inevitable that Australia will follow a similar path.
A fintech called Ignition Advice believes digital advice is the only realistic way to deliver low-cost, consistent, and compliant financial advice en masse.
The firm, which provides technology to facilitate digital advice, argues that super funds could do so through what is known as “intra-fund” advice – a type of relatively simple advice paid for by all members of the funds.
Craig Keary, Ignition’s general manager for Asia-Pacific, says a “hybrid” model could allow technology to answer the most common questions, while allowing face-to-face advisors to work with members of funds with complex needs.
“Digital advice is fundamentally changing the economics of advice delivery by increasing a fund’s advisory capacity in a cost-effective way, while improving the member experience,” says Keary.
The focus on digital advice comes after Adviser Ratings reported last month that there were 3,323 fewer financial advisers working in the industry, compared to a year ago, and the median cost of advice was 8% higher, at $3,256.