Could a robot manage your finances?

Trust in financial advisers has plummeted in the wake of the financial services royal commission, but would you let a robot manage your finances?

Adviser Ratings, which rates and publishes comments on financial advisers à la TripAdvisor, predicts that consumer use of robo-advisers will grow by 43 per cent per year over the next four years, driven in part by digitally savvy older Australians. As a result, it has announced an industry-first review register of direct-to-consumer digital financial planning solutions, or ‘robo-advisers’.

What is robo-advice?

The Australian Securities and Investments Commission (ASIC) says: “It is financial advice delivered online via computer, tablet or smartphone. It uses algorithms and technology in place of a human financial adviser.”

ASIC says robo-advisers can offer convenient, low-cost financial advice, but warns that consumers should be sure this style of advice would suit their needs.

Adviser Ratings believes robo-advice should complement rather than hurt traditional advisers by improving the accessibility and affordability of advice and attracting new types of customers.

Adviser Ratings CEO Wealth Mark Hoven said: “There’s no question that the traditional financial advice industry today has an image problem, compounded by the findings from the 2018 royal commission.

“The fact that only 14 per cent of Australians receive advice, despite the large majority needing assistance with their finances demonstrates a huge unmet opportunity.

“We believe the digital financial planning world can start to bridge this gap and have launched a review register of 36 robo-advisers to provide consumers with more transparency about this emerging world of finance solutions.”

Digital financial planning tools typically offer help with budgeting, investing, superannuation and post-retirement services. They are delivered online and are personalised by the consumer, thus removing possible fears about being judged or embarrassed.

“Given Australians’ love of technology and smartphones, these tools offer significant potential to improve consumer engagement with and control of their personal finances,” said Mr Hoven.

“Because these digital tools are breaking down holistic advice into its component parts and [are being] delivered through the streamlined anonymity of an online world, they are helping to overcome previous advice roadblocks and providing accessibility to professional financial help for more Australians.”

Challenges for the digital advice sector included building trust with consumers, protecting customer data and managing an increasingly heavy administrative burden imposed by financial regulators, Mr Hoven said.

How do you feel about robo-advice? Have you used a robo-adviser? Was the experience satisfactory?

Related articles:
How to let others manage your money
Lifeline for struggling retirees
Super still a work in progress

Written by Janelle Ward

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