Australian millennials are taking to robo advice – but human touch still needed
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Australian millennials are dominating when it comes to using robo-advice to get ahead with their money, according to a new report from Investment Trends.
Robo-advisors uses algorithms and online technology in place of human financial advisers — which allow them to offer lower-cost services.
In Australia, robo-advice has gained significant recognition among the Australian online share investor population, with 22 per cent saying they are familiar with robo services.
Only in the US — where the bulk of innovation in robo-advice is taking place — is familiarity with robo-advice significantly higher (39 per cent).
The report was drawn from a survey of 10,000 online investors and 1425 financial advisers around the world last year.
“The Australian financial services industry is ripe for disruption, as more and more investors take notice of digital advice solutions as an alternative to traditional advice models,” says Recep Peker, research director at Investment Trends.
“Many Australian online investors tend to see themselves as early adopters of innovative solutions, so there is little surprise to see rising awareness and adoption of providers such as Acorns and Stockspot.”
Robo-advice funds, such as Stockspot and Acorns, tend to have lower fees than traditional managed funds because the investment advice given to clients is automated.
The research shows widespread adoption of robo-advice in the US, with 1.6 million American online share investors now using these solutions, up almost two-fold in 2017.
In Australia, current adoption of robo-advice is dominated by millennials, but there is healthy appetite across all age groups.
More than a third of online share investors aged 65 and above say they would consider using robo-advice, while 40 per cent of those in the 55 to 64 age group are also keen.
“While current robo-advice users tend to be younger and less wealthy, the demographic profile of those interested in using robo-advice closely matches the broader investor population, highlighting a key opportunity for robo-advice providers,” says Peker.
“The significant interest in robo-advice reflects a growing population of Australians with unmet financial advice needs.
“Many Australians, young and old, want professional help to achieve their lifestyle goals and improve their financial situation, and many believe that robo-advice solutions can help them along this journey.”
Australians are not entirely comfortable with a digital-only investment proposition.
Among potential robo-advice users, most (68 per cent) say they would trust the recommendations of a robo-advice service only if follow-up customer service was available, such as assistance through a live chat service, phone or face-to-face.
“Building trust is vital to the success of robo-advice providers, and good customer service is the first step towards fostering trust,” says Peker.
“While younger potential users are more likely to trust and implement a recommendation without the need for human involvement, a multi-channel customer support is vital to get older investors over the line.”