Mr Evans said many automated service providers in Australia are being lumped together under the robo-advice umbrella, which can be misleading for consumers.
“The majority only give general advice so they don’t provide a Statement of Advice (SoA) and it appears that there is no requirement to act in the client’s best interest in the minds of many automated service providers,” he said.
“It’s more accurate then to liken them to an online vending machine or a robo-product flogger.”
Mr Evans added that these companies may also be devaluing the advice process and what it means to be an adviser when they use the term in their titles.
“For decades, the industry has campaigned to have the term ‘financial adviser’ enshrined in legislation to stop salespeople and order-takers from abusing it and now is not the time to stop,” he said.
“The broad acceptance of the term ‘robo-advice’ may seem harmless but language is a very powerful tool. It influences a person’s perception and understanding, and can change their reality.”
That is not to say there are no legitimate robo-advisers around, Mr Evans continued, adding that there is a handful of providers out there using algorithms to make personal recommendations.
“But there are limitations to this model,” he said. “For example, individuals are typically slotted into one of only a handful of strategies or model portfolios. There’s no scope for customisation.
“There lies the problem – the classification ‘robo-adviser’ is too broad.”
I know of many advisers that have taken great issue with “adviser-product-floggers†who do little more than focus on funds under management, take 1% and the client rarely hears from them.
These are the advisers that need to feel threatened by robo-advisers…and there is a good chance those consumers are better off with a lower cost robo than a high cost dodo (who soon will be extinct too, which is a great thing for the profession).