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Digital advice the mass market solution: Carlyon

All KiwiSaver providers should be required to have a roboadvice offering, kōura founder Rupert Carlyon says.

Friday, May 29th 2020, 6:39AM 3 Comments

He said it was the only way that enough advice could be provided to a sufficient number of New Zealanders.

Significant numbers of KiwiSaver investors shifted funds earlier this year when markets fell as the impact of the Covid-19 outbreak started to be felt around the world. It is estimated $1.4 billion in funds was moved to more conservative investments, potentially costing investors over the long term.

New Retirement Commissioner Jane Wrightson has suggested a collective effort is needed from financial advisers to help worried investors.

But kōura said that was hard to implement.

“We live in a world where it’s a lot of work giving advice to individual people … by the time you’ve met someone, discussed it and filled out all the paperwork, that’s at least three or four hours of work to even give someone a piece of advice … my question to [Wrightson] is how do we do it in a way that’s affordable? People aren’t willing to pay for it.”

He said commission models allowed consumers to access advice without having to pay but meant that advisers were reluctant to work with people on business that would not generate large enough commissions to make it worthwhile.

“That’s where I see digital advice coming into play.”

Clients who had received digital advice about their KiwiSaver accounts had panic-shifted much less during the market volatility, he said.

He said digital advice had been talked about a lot last year but seemed to have been forgotten for now. The delay in the implementation of FSLAA changes meant a lot of current practices were continuing for the time being, he said.

Providers who offered online signup for KiwiSaver should be compelled to offer advice with it, he said.

The fund selection aspect was “clearly an afterthought” for many, he said.

“All product providers should have to offer digital advice if they want to do online signups, that’s the only way you’ll get the right customer outcomes … If you look at the big banks in particular they don’t like giving advice. Advice is really hard for them but I don’t think that should be used as an excuse.”

Tags: Covid-19 KiwiSaver Kōura Wealth roboadvice

« FMA warns adviser over advice to go conservative[The Wrap] Things returning to normal »

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Comments from our readers

On 29 May 2020 at 10:57 am DavidBeattie said:
Unfortunately I tend to agree for the mass market, because the mass market is not served well by the large providers.

However, the human element of advice must continue to be the primary focus. Whilst in the absence of anything, RoboAdvice might be a better solution than nothing at all, our experiences at Booster during the market volatility showed us that having a human adviser available to chat to over the phone had a significant positive benefit in reducing panic switching.

So well done to all Financial Advisers (bar the obvious exception who rightly incurred the wrath of the FMA).


It's also worth noting that although $1.4b was switched, this represents only 2% of the total FUM.

The flip side positive 'headline' could have been "98% of KiwiSaver FUM didn't panic switch!"

There is some advantage to the lack of engagement from KiwiSaver members after all.
On 29 May 2020 at 12:26 pm rupertcarlyon said:
I disagree that the pimary focus needs to be human advice. There will always be the need for a combination of human + digital advice. However there are lots of people that do not want to talk to anyone. Plus the cost of delivering in person personalised advice to every single KiwiSaver client is far too high. So we can't achieve our desired client outcomes if we focus primarily on human advice.

In my view, we need to make sure that every single person has the proper fund setup. And the current digital signup processes do not deliver that outcome. Digital advice would go a long way to getting people started properly.

The $1.4bn makes up only 2% of the total KiwiSaver market, but it is over 7% of those that were sitting in the growth funds which is far more relevant.
On 29 May 2020 at 4:16 pm DavidBeattie said:
Think we are both reasonably on the same page Rupert when it comes to the mass market and totally agree that all providers have a clear responsibility to make sure everyone has the proper fund set-up.

Human advice focus will continue to be a strong focus of ours, supplemented by robo.

You're also right on the 7% number, but "93% of KiwiSaver members in Growth Funds didn't panic switch" still makes for a reasonably good headline. ;-)

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