INTHEBLACK June 2022 - Magazine - Page 49
AT A
GLANCE
Robo advice includes
a set of digital
financial technologies
that leverage
mathematical
modelling to provide
automated personal
advice.
Millions of investors
worldwide have
already shifted close
to US$1 trillion
(A$1.4 trillion) in
assets onto various
robo-advice
platforms.
Some financial
advisers have begun
using robo-tools to
offer low-cost
solutions to those
consumers who can’t
afford higher-end
advice.
C A N A C T U A L H U M A N F I N A N C I A L A D V I S E R S M AT C H T H E
L O W- C O S T O F F E R I N G S O F FA C E L E S S A D V I C E P L AT F O R M S
O F F E R I N G S O P H I S T I C AT E D C O M P U T E R A L G O R I T H M S ?
T
he 2003 movie Terminator 3: Rise
of the Machines, starring Arnold
Schwarzenegger, pitted humans against
cyborgs in an epic struggle to save
humanity from annihilation. Thankfully, the
human race came out on top, but not without
suffering substantial casualties.
Almost two decades later, the battle between
humans and machines is erupting on another
frontier.
This time, it is pitting financial advisers
against sophisticated computer algorithms
designed to deliver financial advice and portfolio
management solutions at a very low cost. Unlike
the science fiction battles against cyborgs, the
exponential rise of “robo-advisers” seems to be
both unstoppable and unwinnable.
In fact, millions of investors worldwide have
already shifted close to US$1 trillion (A$1.4
trillion) in assets onto various robo-advice
platforms.
WHAT IS ROBO-ADVICE?
At its heart, robo-advice is another way of
describing digital financial technologies that
leverage mathematical modelling to provide
a level of automated personal advice.
Some robo-advice platforms are more
sophisticated than others. A common aspect is
their use of computer algorithms to determine
an individual’s investment risk profile based on
entered financial information. Platform offerings
can include producing personalised statements of
advice, recommendations around asset allocation
and financial products, and even active portfolio
management.
Financial adviser ratings and customer review
service Adviser Ratings maintains a register of
Australian robo-advisers, which it defines as
“online smart tools”. Its register incorporates
45 companies offering online financial tools that
provide financial advice, automated investing
and post-retirement services, as well as personal
budgeting calculators.
These types of services have been launched to
fill the growing demand for financial advice from
individuals unwilling – or unable – to engage
human financial advisers and incur what can
often be substantial ongoing costs.
Despite a huge growth in the number of
Australian investors, Adviser Ratings estimates
that 86 per cent of Australians remain unadvised
by fellow humans.
BEST OF BOTH WORLDS
Angus Woods CPA, Adviser Ratings’ founder,
says COVID-19 has been partially responsible
for both an explosion in investor numbers and
a surge in advice interest.
“What we have found is that the generation
that is actually more interested in advice about
their wealth and more interested in speaking to
intheblack.cpaaustralia.com.au June 2022 49