Target market for robo-advisers to grow with net usage

Robo-advice does not work well in complex situations but suits people in their 30s and 40s who are already using the internet to manage their finances and are starting to save serious money toward retirement.

Robos work very well where the investor’s situation is not complex and a person neatly fits into one of several predetermined categories. For example, the small but relatively focused subset of people in their 30s and 40s who are starting to save serious money toward retirement are perfect for robos.

They may have already looked at negative gearing and margin lending to grow their savings but feel disinclined to take on the added risk in both. Having grown up with technology, this group is more likely to adopt web-based financial advice and therefore be the first target market for most robos. The group is reasonably homogenous – the main difference between individuals aged in their 30s and 40s derives from their risk tolerance profile.

Their need for wealth accumulation is great. In an age of reducing government spending on pension programs, Generation Y is increasingly being asked to fund more of its own retirement. With wealth-building strategies essential, some will turn to robo-advisors for financial advice that may well be much cheaper to access than advice offered by a human adviser.

Source:  Target market for robo-advisers to grow with net usage – Professional Planner