Are online apps a threat to advisers?

Software algorithms that provide investment advice may become more common over the coming year, but aren’t being seen as a threat to human advisers by those in New Zealand.

Sunday, January 5th 2014, 1:53PM

by Susan Edmunds

Several startup companies have made headlines recently, offering software that helps to manage money and investments.

SigFig is a website that manages portfolios automatically. Betterment, FutureAdvisor and Wealthfront offer similar services and Wallet.Al takes an even more hands-on approach, monitoring transactions and sends alerts if a client strays from a set path.

Even Sorted is offering a fund finder, which matches people with the right KiwiSaver fund for their circumstances.

An American study found almost half of investment advisers thought online services would become significant competition within the next five years. And an Australian study found about half of the respondents were more likely to look online for advice than they were to approach an adviser.

Auckland adviser Jordi Garcia was confident that apps and websites would take off among DIY investors. “A certain segment of the population do their own research and so on – they are they sort of people who’d do their own thing anyway.”

He said the technology might be a threat at the margins for financial advisers but he said clients sought out his services for the advice he offered, not just product recommendations.

“It’s not because they don’t know what to do but because they don’t have the inclination or the time and would rather have someone who focuses all his or her energy on it. A software programme might select this fund or that fund and people will jump at those, but will they have the interest to follow through and know what to do in six months when it hasn’t delivered to expectations?”

Most of his clients approached their relationship as a partnership, where the key offering was advice to help them avoid mistakes, he said.

But he said the KiwiSaver offer could have more merit because it was not worth an adviser’s time to get involved with helping clients work out what fund they should invest in. “The problem with KiwiSaver is how will advisers get paid? People expect results but they don’t want to pay.”

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