‘Blended’ advice key to meeting investor needs

Macquarie University senior lecturer and director of the university’s Chartered Financial Analyst (CFA) Institute partnership program, Dan Daugaard, said a blended business model is likely to accommodate the evolving demand of investors for different forms of advice.

According to the CFA Institute's fintech survey, published in April 2016, mass affluent investors are the most likely to be positively affected by "automated advice tools in the the form of reduced costs, improved access to advice and improved product choices".

"In contrast, the survey suggests large investors such as institutions and ultra-high net worth individuals are likely to continue their engagement with human advisers because they require complex and tailored advice," Mr Daugaard said.

High net worth investors are likely to occupy the middle ground, he said.

"These views suggest a blended model of robo and human advice might capture the widest range of investors," he said. "Smaller, more standard investor categories receiving low-cost robo-advice whereas, as the investors get larger and [sit in] more complex categories, they would progressively engage with more expensive, tailored services.

"The survey data concerning robo-advice provides conflicting signals. While many platforms have notched up significant growth, there are some indications that investor demand might not necessarily continue," he said.

Despite the commonly held view that Generation Y are the most inclined to use robo-advice, many younger investors may not want to pay for advice, according to ING Direct's The truth about Gen X and Gen Y report.

"The report suggests that developing a flexible range of advice offerings would be necessary to successfully evolve the engagement with investors as they become more experienced with the cost and the benefits of advice over time," Mr Daugaard said.

"This blended approach is also likely to be delivered in a diversity of branding to appeal to multiple demographics."