INTHEBLACK June 2022 - Magazine - Page 50
F E AT U R E
// R O B O A D V I C E
“WHAT WE ARE STARTING TO SEE IS THAT A LOT OF THESE TOOLS
THAT WERE LAUNCHED THREE OR FOUR YEARS AGO, THAT WERE
ONCE CONSIDERED ROBO-ADVICE, ARE BEING REBADGED TO ASSIST
ADVISERS TO OFFER LOW-COST SOLUTIONS TO THOSE CONSUMERS
WHO POTENTIALLY CAN’T ACCESS THAT HIGHER-END SERVICE.”
ANGUS WOODS CPA, ADVISER RATINGS
someone and getting a handle on their money is that
millennial/Gen Y segment,” he says.
“The increase in people wanting to speak to an
adviser in that younger generation has basically
increased exponentially.
“So, what does that mean for robo-advice? The
expectation from that younger generation is that
advisers will have access to those specialty tools.”
Underscoring this has been a lot of recent activity
involving financial advice groups partnering with robotools developers in order to provide a combination of
human advice and automated advice solutions.
“What we are starting to see is that a lot of these
tools that were launched three or four years ago,
that were once considered robo-advice, are being
rebadged to assist advisers to offer low-cost solutions
to those consumers who potentially can’t access that
higher-end advice,” Woods says.
“I think that is going to blow out over the next
two to three years, especially as that younger
generation comes through.
“I’m seeing a whole bunch of solutions. What we
get is a lot of the new players coming and wanting
to access advisers. Is there a way we can rebadge
or ‘white label’ our solution to consumers coming
through your [the Adviser Ratings] platform?”
50 ITB June 2022
LEARNING FROM THE MACHINES
Willingly or reluctantly, a growing number of
financial advisers are adopting an “if you can’t beat
them, join them” attitude.
Dr Luis Filipe Goncalves-Pinto, who heads the
Master of Financial Technology program at the
University of New South Wales, says robo-advisers
have been driving the disruption in the financial
advice sector and helping inexperienced investors
overcome cognitive biases.
“Traditional human advisers could help overcome
these limitations, but they are expensive, generally
ineffective and they cater mainly to wealthier
individuals,” Goncalves-Pinto says.
“This leaves room for robo-advisers to improve
the effectiveness of financial advice and increase the
number of people who receive advice.
“However, many potential clients are algorithmicaverse, and many algorithms used by robo-advisers
do not work very well.”
The main algorithm used by robo-advisers is the
mean-variance optimisation model developed by
American economist and 1990 Nobel Memorial
Prize winner Professor Harry Markowitz.
Also known as the “modern portfolio theory”,
mean-variance is a mathematical framework for