Proper robo-advice should not be conflicted, as long as the platforms are completely separate from product manufacturers, according to robo-advice firm, Stockspot.
Stockspot was a robo-advice platform that managed portfolios that invested in exchange traded funds (ETFs) that was launched in 2013 by chief executive, Chris Brycki.
Stockspot was critical of the notion that robo-advice was as conflicted as vertical integration as it defined itself as being product agnostic and did not receive commissions based on its recommendations.
That criticism had been laid on by the Association of Independently Owned Financial Professionals (AIOFP). Brycki said he agreed with the AIOFP’s assessment that product manufacturers should be separate to advice providers.
“We don’t manufacture ETFs or funds, we’re clearly separate from all the products we’re recommending, and we don’t receive any payment or remuneration we recommend; we think that’s important for the industry going forward as well,” Brycki said.
“The last thing that would be in the best interest of consumers is a watering down of regulations to make it easier to provide personal advice, which would lead to product pushing based on conflicts.”
Stockspot generated its revenue by charging a fee for picking the ETFs and managing the client portfolio, which ranged from 0.4% to 0.6% per year depending on how much a client invested.
The firm was also involved in the consultation process that led to ‘RG 255 Providing digital financial product advice to retail clients’.
“We also strongly believe that anyone providing personal financial advice should be regulated in a way that’s consistent with humans providing personal financial advice,” Brycki said.
“We’ve never tried to evade the rules or get any regulatory relief and we have to meet best interest duty like any other personal financial adviser and ultimately, we think that’s important for consumer protection.
“When the market crisis hit last year we were able to keep calm and continue to keep investing through that period.
“A lot of self-directed or other retail investing products that didn’t include personal advice… you saw a lot of retail investors switching at the wrong time.”
Brycki said there were key differences with the way robo-advice was defined in Australia.
“We’re a provider that provides personal advice and it’s scoped advice around investing, but it is personal advice,” Brycki said.
“Robo-advice – in the pure sense of it being an online investment service – has been one of, if not the fastest growing [sectors] in asset and wealth management over the last five or 10 years around the world.
“It’s been going very well around the world; Australia I would say is a little bit behind the rest of the world and that’s because it took a bit longer for Australians to understand the value of ETFs as a product.”
Brycki said robo-advice not only had a place for consumers that would never see a human adviser, but also for advisers that were unable to service all their clients.
“There’s fewer advisers out there and they’re limited in the time they have available to service,” Brycki said.
“[For] the clients aren’t looking complex advice… there’s a place going forward for robo-advisers to actually be supporting financial advisers to make their services more affordable and allowing them to reach more people.”
