Robo Advice to Cover the Spectrum of NZ Consumers
Robo Advice to Cover the Spectrum of NZ Consumers: New White Paper
New digital advice (DA) services expected to arrive in NZ next year will benefit a range of consumers from beginner investors through to high net worth individuals, according a new white paper published by Auckland specialist consulting firm, Mosaic Financial Services Infrastructure.
Until now so-called ‘robo advice’ has been precluded in NZ by the legal requirement for financial advice be delivered by a ‘natural person’. But under a newly-minted exemption, the Financial Markets Authority (FMA) is expected to begin licensing DA providers early in 2018.
While DA is typically reported as targeting lower income groups often priced out of face-to-face financial advice, the Mosaic ‘Bot or not?’ white paper points to offshore evidence showing wealthier consumers are also switching on to automated advisory services.
Myles Allan, Mosaic founding partner, says the rise of digitally-attuned consumers has not been limited to the younger ‘millennial’ generation.
“All demographics are experiencing a ‘millennial’ shift,” Allan says, “this is characterized increasing ease with and reliance on digital service delivery and an expectation of a great user experience across all personal services via their mobile phones or other digital devices.”
The Mosaic paper argues that is a “compelling concept supported by the massive growth in high net worth DA products”.
“... it turns out the ‘millennials’ do have money and they need accommodating right now,” the report says.
However, Allan says the common conception that DA offers investors with fewer assets access to robust, institutional-grade financial advice also holds true.
“Face-to-face financial advice is usually a reasonably expensive exercise with advisers unable to efficiently service clients who fall below a certain level of assets,” he says. “DA provides those consumers an opportunity to receive decent financial advice and access to low-cost products – such as exchange-traded funds (ETFs) – albeit without much of the nuance associated with human-based advice.”
Despite the apparent cross-cohort appeal of DA, the Mosaic white paper says the coming automated financial advice services won’t decimate traditional face-to-face advisory businesses – if they position themselves correctly.
“NZ is likely to follow overseas trends where ‘hybrid’ digital advice services are rapidly becoming the norm,” Allan says. “Progressive institutions and boutique advisory firms are including digital advice as part of a continuum where clients can graduate to human-fronted financial advice when they feel comfortable enough to do so.”
The Mosaic white paper plots the history and growth of DA globally while mapping out its likely development in a NZ context.
According to Allan, with consumers due to face an abundance of DA services next year they need to understand the differences between the wide variety of offers that will be on show.
Over the long term, though, the white paper says “DA will become simply just another tool for delivering better financial outcomes for consumers rather than an ‘out there’ threat from our new robo-overlords”.
A free copy of the white paper titled ‘Bot or not: how NZ financial services firms can win in the coming digital advice revolution’ is available by clicking here.