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Consumers might favour algorithms over fallible humans

New Zealand consumers might trust roboadvice more than they do human advisers, at least at first, one industry commentator says.

Monday, May 2nd 2016, 6:00AM

by Susan Edmunds

It is likely that the Financial Advisers Act review will clear the way for automated advice in New Zealand. It is believed a number of people are already developing roboadvice tools, including one industry figure who has been developing a platform for a couple of years.

The CFA Society has released a member survey which found 70% of respondents expected “mass affluent” investors would be positively affected by automated financial advice. They would have fewer costs and better access to advice and products, the survey said.

Jeff Stangl, president of the CFA society in New Zealand and a Massey University academic, said roboadvice had the potential to be disruptive for New Zealand financial advisers. “Initially at the lower end of the market, smaller investors.”

He said many financial advisers could find the core of their client base was tempted over to roboadvice.  “If you have over $50,000 in accumulated wealth you are a good target for smaller financial planners.  Some of the bread and butter of smaller-scale financial advisers will be subjected to disruption as [roboadvice] is rolled out. It’s a conundrum.”

Stangl said trust was a big problem for New Zealand financial advisers. “There’s enough bad press on advisers gone bad, looking after themselves instead of their clients. That will draw people away from the human interface because there is a belief they can’t be trusted.

“They will initially trust a roboadvice platform more than a human adviser. But it will only take another GFC where the algorithms go wrong [to change that].”

Roboadvice could also get a hold among the many New Zealand consumers who resented having to pay for advice, he said. 

Stangl said it was reasonable to expect financial advice to face the same sort of shake-up as the accounting industry had, with the advent of software such as Xero.

That had forced a number of bookkeepers out of business and meant many accounting firms had transformed their business models to focus more on interpreting results and business coaching.

“It’s a changing world and ultimately there will be a good outcome but what that outcome will look like it’s hard to say. Definitely, the livelihood of the industry is being disrupted.”

Tags: CFA roboadvice

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