Curated Content: The Future of Advice

The future is already here — it’s just not very evenly distributed
— William Gibson

ASIC's recent action against Spaceship Financial Services Pty Ltd has generated a flurry of coverage and elicited a range of options from industry commentators. 

Credible, considered commentators like Justin Brand objectively focus on the ethical failures. Unfortunately, underpinning most popular commentary is a sense of Schadenfreude; joy derived from the suffering of a business hubristic enough to suggest alternatives to existing models.

The disconnect between their activities and their advertising should be a legitimate concern for our corporate regulator, but some of coverage seems to reflect the popular sentiment that technology has not provided the answers it promised to investors and advisers. 

The starry-eyed tech start-up and venture capital world salivated at the thought of a new saviour who would engage Millennials in the financial system and increase the options for Australians to invest in technology equities via their super.
— Aleks Vickovich on 11 April 2018

More convenient and cost effective

Digital advice providers (also known as ‘robo-advice’ or ‘automated advice’ providers) provide ‘automated financial product advice using algorithms and technology and without the direct involvement of a human adviser
— ASIC RG255: Providing Digital Financial Product Advice to Retail Clients

Robo-advice may be growing in Australia but not at the rate expected by some participants. While some applications of technology may be transformative, some will be complementary and some be irrelevant.

In their Background Paper 6, the Royal Commission into Misconduct in the Banking, Superannuation and Financial Services Industry repeated ASIC's view that 

the provision of digital advice has grown rapidly in Australia since 2014, with a number of existing and new AFS licensees developing digital advice models.
— ASIC Regulatory Guide 255: Providing Digital Financial Product Advice to retail clients

While it's almost impossible to predict the success of technology, Gartner's 'hype cycle' might help you.

(c) Gartner 2017

(c) Gartner 2017

It's a busy slide, but even if you only adopt it as a way of seeing the path of innovation, it might help you contextualise some changes and better predict their impact on your business and your clients.

If you think 'robo-advice' is on top of the 'peak of inflated expectations' then you'll react very differently to those who see it plodding steadily up the slope of enlightenment.

Credible businesses like Mercer have been optimistic about digital advice. Their 2016 white paper on robo-advice is worth considering.

Even though we consider that digital advice is currently wallowing in the trough of disillusionment, we understand the promise of digital advice and the inevitable challenge they represent.  

How can Assured Support be both cautiously optimistic and bitterly disappointed by the failure of robo-advice?

We see digital advice as a way of complementing existing advice models and not an alternative to consulting an objective, properly-motivated advice professional (so we're optimistic) but we are also disappointed that some innovative digital advice businesses have abandoned disrupting financial services in favour of maximising their immediate financial returns.

It's the disconnect between the reality and the rhetoric that causes the problem (as Spaceship found out). 

For an excellent account of this tension, read Felix Salmon's excellent article on Betterment, Wealthfront and the passive-investment revolution - "Beware of Robo-advisers bearing low fees"