Robo-advice start-ups go beyond disruption to new clients

Robo-advice start-ups are looking to use technology to drive massive expansion in the financial advice market, rather than to simply disrupt it.

While established players, such as AMP, and the wealth management arms of banks are among those vulnerable to robo-advice, start-ups claim they are not targeting their market.

“People talk about disrupting the financial services industry with robo-advice, but only 20 per cent of the country gets advice,” David Pettit, chief executive of Perth-based robo-advice start-up Future Penny, told The Australian. “There’s a massive piece of the market that aren’t seeking or engaging with advice professionals.”

Robo-advice delivers investors a low-cost investment management portfolio based on algorithms and technology.

Mr Pettit said that according to research carried out with the Australian Institute of Management only 4 per cent of Australians had access to financial advice through their companies, but that about 80 per cent of people would use advisers if corporations made them available.

Backed by BRW rich-lister Zhenya Tsvetnenko, Future Penny struck a partnership and raised equity with the Australian employee benefits group Super-Advice, which is poised to roll out the company’s robo-advice and financial literacy education to more than 75,000 clients. Future Penny’s model helps users diagnose their own circumstances through questionnaires and provides feedback, and if needed, can suggest financial products.

“I’ve got a massive belief that if you’re organised in relation to your money you’re happier, healthier, you’re a better family and community member — and you’re more productive in the workplace,” Mr Pettit said. “We want to make that service available to corporate Australia.”

Joel Robbie, founder of online financial advice platform Nod, said one of his company’s differentiators was the fact that financial questions from users were answered by actual humans.

“We’ve created a two-sided marketplace for financial advice, or answers for money questions,” Mr Robbie told The Australian. “We want people to ask a question, select someone to answer it, securely pass over their information to that adviser and get that answer all online and all on one platform.”

Mr Robbie cites research from the Australian Securities & Investments Commission that shows about 60 per cent of Australians have never been to see a financial adviser.

“One of the reasons is the cost of entry-level advice, which can extend into the thousands of dollars. Most people are only prepared to pay up to about $300 for advice,” he said.

“But most people would love to go and see a professional just to ask one question. They don’t want a comprehensive financial plan; they just want to ask if this is a good idea for me.”

Nod, which launched last month online at Nod.money, connects people with questions about their finances to advisers, accountants or “money-savvy” individuals, breaking down the cost of engagements and allowing advisers to bill for small engagements.

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Source: Robo-advice start-ups go beyond disruption to new clients