NAB’s Robo Advice – should financial planners be concerned?

Let’s face it, if the NAB is about to launch robo-advice, then the three other big banks and AMP won’t be far behind, so should financial planners be concerned? First we should determine what kind of advice a computer program can realistically provide.

Risk Profile Questionnaire

For many years financial planners have been asking clients a series of questions to determine their risk profile based on score charts. These are relatively simple to produce and can easily be automated. More recently, however, there has been a move for the questionnaire to play a smaller role as the client’s goals are also important. If the client wants to retire at age 65 but won’t get there as a balanced investor, then one of their option is to invest more aggressively. This requires a discussion. Can this be automated? I would say yes.

Portfolio Construction

Constructing a portfolio for a given risk profile has been outsourced by many advisers for many years, Industry super funds have also proven that client’s will happily select a pre-constructed portfolio that suits their risk profile. Some financial planners will argue that they can provide greater returns based on their fund manager selection but generally speaking I think this is an area that can easily be automated.

Insurance & Retirement needs analysis

A quick Google search will provide you with plenty of examples of both life insurance and retirement calculators. They typically fall into one of two camps: overly simplistic and therefore of limited use or the “black box” solution requiring pages of assumptions and disclaimers to be read and therefore only of use to a limited few clients (typically engineers and school teachers).

However technology is getting smarter and more user-friendly so we should expect the next wave of software solutions to land somewhere in the middle of the existing options and begin encroaching on the financial planner’s turf. So financial planners beware: if the advice you are providing to your clients is simplistic and your review meetings are nothing more than investment portfolio reviews then you are fast becoming obsolete.

However as long as legislation around superannuation and tax remain complex, there will always be a place for the well qualified adviser who can add real value. Also the opportunity will be there for advisers that use technology for their own purpose to engage their clients in a richer client meeting experience.  Financial modelling calculators designed specifically for an adviser and their superior skill set can be used to explain and compare strategies in a way that Robo advisers will never be able.

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Hans Egger is Co-founder and managing director of AstuteWheel Client Engager, Financial Planning Software and Estate Planning Software and admin of The Modern Adviser