Are you ready to hand your money over to a Robot to manage?
Recently a poll determined that most people from Generations Z and Y said they would accept a gift of “time with a financial planner” from their parents, according to new data from the Financial Planning Association of Australia. All up 57% of all Australians said the same. It potentially indicates a strong will and a positive desire for professional help to create a financial plan.
Of course I am biased - as I think everyone should have a personal financial plan. Not because I am a Financial Planner but because the most important asset in your life is you. It’s the most important thing outside of a business plan and a good plan gives you a great foundation to build on. Its definitely not something that we should chase the cheapest service on offer though.
Right now the buzz word for financial planning with some millennials - is Robo-advice. So what is robo-advice? Robo-advisers are essentially complex software programs that use algorithms to automatically perform many investment tasks carried out by a human financial adviser. It’s interesting that robo-advisors have been around since 2010 in Australia yet they have never really taken off here as they have in the USA.
The benefit of Robo advice is the fact that they are easily accessible (as long as you are connected to the internet) and the have very low fees and fewer conflicts of interest.
The main reason that they have not taken off here has a lot to do with the fact that our industry is wrapped in regulation and the robo-advisors struggle to adapt to the changes in our industry. The US is less regulated.
Most robo-advisors offer a narrow range of services. They rely on brief questionnaires and are not able to provide peripheral strategic advice that humans can. They don’t enquire about other investments or circumstances which limits the scope of their advice. This is mainly due to the fact that their algorithms have limitations.
Hence many are initially attracted by the low fees however if things happen that upset us – the robo advisor simply hands back the balance of your funds so you can move on. There is little ability to enquire or ask complex questions and expect an answer.
Time will tell if they will stay the distance as a business model. In the meantime for more information on quality financial planning services and strategies, call the team at UHY Haines Norton for advice on how to improve your financial position on 4972 1300.