Is robo-advice really such a revolutionary concept? Some see it as a way of providing reasonable-quality financial advice to mass-market investors unwilling to pay a human. Others see job cuts and a certain unwelcome shirking of responsibility.
One could argue that a roboadviser is just a poor man’s human being – and, indeed, research from Legg Mason Global Asset Management shows that the rich are turning their noses up at roboadvice.
“The survey clearly suggests that, while many robo-advisers are targeting wealthy clients who have traditionally used an independent financial adviser or wealth manager, they have a real struggle ahead to persuade investors to make the switch,” says Adam Gent, head of UK sales at Legg Mason.
“It’s at a very early stage, especially in Europe,” says Guillaume Prache, director of the European Federation of Investors and Financial Services Users, more commonly known as BETTER FINANCE. “At the moment, it’s not a threat to anyone.”
BETTER FINANCE sees robo-advice as a broadly positive development for investors, with the potential over time to have a positive impact on the actual performance of investments. That’s because robot investors almost exclusively use low-cost index funds. BETTER FINANCE says that the simplified fee structure, made up of an advice fee and the underlying fund fee, also makes robot investors easy to understand for individual investors.
Concerns about whether they will be adequately regulated do not appear to be all that well founded. “Except in Germany, supervision is not a big problem,” says Prache. “Most robot investors are registered either as financial advisers or as financial advisers plus investment companies. Only in Germany were they not registered.”
Read the full Funds Europe article here.
Find the BETTER FINANCE research on Robot Investing here.