Your robo adviser is ready to consult
Kiwisaver provider Kiwi Wealth has started the roll-out of the country’s first robo advisory service.
Until now, personalised financial advice could be given only by a human being, largely limiting financial advice to the wealthy with the funds to pay fees and commission.
But Kiwi Wealth secured permission from the Financial Markets Authority to launch a robo advice service, and has now started making it available to its Kiwisaver members.
It had the potential for getting more people to switch to funds that are more appropriate to their long-term saving goals.
Kiwi Wealth’s robo adviser will be deployed through the scheme’s Future You online tool, which was designed to help Kiwisavers pick a fund, and set a contribution rate likely to get them a big enough nest-egg to afford the kind of retirement they hope for.
But instead of just showing them options, Kiwi Wealth’s robo adviser will provide a recommendation of the level of risk that suits an individual’s personal circumstances.
‘‘Being in the right fund is one of the most important decisions a Kiwisaver member will make,’’ said Ramesh Naran, Kiwi Wealth’s head of digital strategy.
‘‘Our members are empowered to make decisions, with the comfort of knowing they’ve received personalised financial advice.’’
Testing showed that Kiwisaver providers wanting to overcome human inertia need to make it easy to switch to a recommended fund. So, once a recommendation is made, there’s a single on-screen button that can be pressed to switch fund.
‘‘It seems simple but, until now, it wasn’t permitted by law,’’ said Naran.
‘‘Robo advice is allowing us to reinvent the way Kiwis manage their finances, giving many access to personalised financial advice that’s previously been out of reach.’’
The launch was not the beginning of the end for human advisers though, Naran believed.
Kiwi Wealth’s market research showed people welcomed robo advice, but still wanted to have humans available to talk to, should they feel the need.
‘‘It’s a finding that further supports the trend we’re seeing overseas toward what’s known as ‘hybrid’ advice,’’ Naran said.
‘‘Rather than robots replacing people, technology is streamlining financial advice by freeing up human financial advisers to do the things technology can’t do, such as providing help with the emotional and behavioural aspects of money management.
‘‘The leaders in robo advice agree that people don’t see robo-advice as a binary thing. As we continue to develop our robo-advice platforms, we’re working out what aspects of the financial advice experience can best be provided by technology and what can be best provided by humans.’’
As robo advice became more mainstream, human financial advisers would become more like financial behavioural coaches, he said.
‘‘The ability to interact with human advisers is key to the success of robo advice.
‘‘In the early days of robo advice, we expect people to connect with a human adviser to help with the emotional elements of financial planning, which is where human guidance remains so important.’’
The feature has been released to an initial subset of Kiwi Wealth Kiwisaver Scheme members and will be eventually rolled out to other members.
It may be that New Zealanders are more willing to embrace robo advice. In 2016, one in five people responding to a survey by Kiwi Wealth said they would use a robo advice service.
That was higher than the result of a survey in Britain earlier this year paid for by UK investment company IW Capital.
It found only 11 per cent of investors would currently consider using a robo adviser.