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Australia lagging on robo-advice

Australia is still dragging the chain on robo-advice but there is hope for local providers, according to new global research on the take-up of the technology.

Latest Investment Trends shows Australia is still lagging behind when it comes to the adoption of robo-advice, with just 7% of active online investors in the nation using robo-advice services in some shape or form.

Compared with the US (23%) and even the UK (13%) Australia appears to be a fair way behind.

The findings emerged from Investment Trends latest Robo-advice Report, which surveyed around 20,000 online investors in the US, UK, Germany, France, Singapore, Hong Kong and Australia to find that not only is Australia struggling with adapting, it is being left behind by the US.

Investment Trends research director Recep Peker said the US robo-advice market wasn't standing still, with big players getting increasingly competitive about their robo offerings.

"US robo-advice providers have not stood still as they continue refining their offerings - specialist fintech providers are getting better at being banks, while the established wealth brands are getting better at becoming fintech firms," Peker said.

"Powerhouses like Vanguard, Schwab, E*TRADE, and Fidelity already have well established in-house automated investment services, but continue to compete intensely on price and mobile platform improvements, while fintechs like Betterment, Wealthfront and Stash are intent on being a one-stop-shop for investors' savings, investing and transacting needs."

Peker said that while primary online investor relationships in the US are evenly split between established wealth brands and fintechs, all successful robo-advice providers in the nation have two things in common: their ability to deliver a diversified portfolio, and demonstrate tangible time and cost savings to customers.

So far, micro-saving services such as those offered by Raiz - with its 200,000 customers - have led the way for robo offerings locally, ensuring hope for budding robo providers.

"There is significant scope for growth with 38% of Australian online investors considering using robo-advice in the future," Peker said.

"The recent launch of solutions like CommSec Pocket and Vanguard Personal Investor gives Australians greater access to low cost, diversified portfolios.

"But to stand out, providers must demonstrate their cost and time savings benefits, and how the service is the ideal option to begin their investing journey."

Robo-advice operators might be well advised to focus on capitalising on the interest of women online investors, who Investment Trends firm said are not only more likely to be using robo-advice services than men, but also have a greater level of interest to start using robo solutions. The trend is not only limited to Australia, but is noticeable around the globe.

About 29% of women online investors in the US currently use robo-advice compared to 22% among male online investors, the firm pointed out. Locally, 40% of women online investors will consider using robo-advice in the future, compared to 36% of men.

"Providers that intend to satisfy the strong latent demand for robo-advice among women investors will do well to understand the distinct needs and priorities of these investors," Peker said.

"When selecting a robo-advice provider, women online investors are more likely than men to prioritise the user interface and education initiatives but are less likely to focus on fees."

Read more: Robo-adviceInvestment TrendsVanguardRecep PekerBettermentCommSec PocketFidelityWealthfrontFinancial planning
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