Automated financial advice is set to enjoy a boost, thanks to disturbing revelations at the royal commission
The Hayne royal commission has blown financial planning apart by exposing the industry's high fees, lack of transparency and conflicts of interest. This is similar to what happened in the US after the GFC, says Pat Garrett, CEO at the online financial adviser Six Park.
What emerged there – and now in Australia – is a new breed of financial adviser that is disrupting the status quo.These robo advisers use technology to give automated, personalised advice to match you to the right investment strategy. They pick the best low-fee products and adjust your portfolio to match your risk profile. They take care of your annual tax statements as well as broking and trading.
Robo advisers have taken off in the US with 1.6 million investors signed up, but they have been slower to catch on here. Only around 22% of Australians are familiar with them, according to research house Investment Trends.
Just like Uber or Airbnb, these online disruptors offer valuable, straightforward services for low fees. The royal commission heard how retail super fund MLC MasterKey (owned by NAB) charged a fee of 5.8% plus a planner adviser fee of 1.5%, a total of 7.3%. Annual charges on a $50,000 investment would be $3650. In contrast, robo adviser Stock spot charges $455 a year (0.91%) on the same amount.
“We want to do away with the high fees, confusing jargon, endless paperwork and lack of transparency that gives the wealth management industry a bad reputation,” says Chris Brycki, founder and CEO of Stock spot, one of the longest-standing Australian robo advisers, which opened its doors in 2013.
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