Roboadvice offers 'must show value'
Roboadvice is the “best possible thing for New Zealand financial literacy”, says the man responsible for developing Kiwi Wealth’s offering.
Tuesday, October 16th 2018, 6:00AM 
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Kiwi Wealth and Nikko Asset Management have been granted the first two exemptions to allow them to offer personalised roboadvice in the New Zealand market.
Both are working on products to come to market in the near future.
Kiwi Wealth’s offer is now going through a testing phase before being launched to the public.
It will run through the scheme’s Future You online tool, which already offers class advice to help guide KiwiSaver decisions.
The biggest change will be that it will allow KiwiSaver members to then implement the decisions they make, whether that is fund choice or the level of contribution they make.
Kiwi Wealth’s head of digital strategy, Ramesh Naran, said it was important that it got the customer experience right.
It was working through a quality assurance and compliance process, testing with staff, to ensure that it would do what it needed to at launch.
“It’s difficult to put a timeframe on [when it will be made available to the public]. We are trying to follow the traditional start-up approach so it’s not so much timeframe but have we got the customer experience right? Given that KiwiSaver is a difficult product to get people to engage with anyway, we need to make sure we build something that has cut through and usability. Getting testing right is a key part of that.”
The tool would need to use customer information to give context to its recommendations, but still operate in a simple way, he said.
Naran said customers expected roboadvice solutions to be like other platforms they were used to, such as Facebook. “That’s the benchmark financial services had to get to now.”
Kiwi Wealth will offer human advisers to step in as needed. Naran said as the volume of people using the tool increased, it expected an increase in the number of people who wanted to turn to human advice as well, he said.
But he said roboadvice was a way to get advice to people who would not normally be able to access it. Young people expected to be able to deal with their KiwiSaver accounts themselves, online, and have help at hand if it was required, he said.
Kiwi Wealth’s research showed there were a group of people who were interested in KiwiSaver but scared to make changes to their own accounts in case they did the wrong thing, he said.
The tool could offer guidance and implementation tools to help those people feel empowered.
“I’m excited about what it means for New Zealand. It’s the best possible thing for New Zealand financial literacy.”
Naran said the tool would need to be able to clearly articulate what the benefits of its recommendations were, so investors could see the value they received from the roboadvice interaction.
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Fully automated RoboAdvice (eg: SigFig, FutureInvest) take consumers on a journey, with the conclusion for those who persevere being a bespoke portfolio of ETFs / low cost investments tailored and automatically re-balanced for their unique situations. This is a high-volume / low-margin game, where pricing and transparency are the primary factors for early & secondary adopters. Interestingly, in the US many consumers opt-out during the process to seek human engagement.
Conversely, Guided RoboAdvice (ie: the majority of digital wealth management platforms available on the market today) assist consumers in purchasing a blended assortment of in-house products that meet some of the consumer's investment objectives. Whilst these can be re-balanced, they are more aligned with the asset gathering aspirations of the business and bypass traditional intermediaries. Nevertheless, the entity can ensure that deliverables are both consistent, and compliant without having to worry too much about servicing an inquiring industry. They are better defined as marketing gateways than RoboAdvice, and provide great operational leverage for the entities.
My pennys-worth is that the benchmark for Robo-anything is the price of a typical balanced capability at circa 50-60bps pa. I'm not convinced that the volume really exists in NZ to make that sort of solution viable - but will wait with interest to see how the Kiwi consumer reacts.