Robo-advice and blockchain innovations will out-disrupt peer-to-peer and crowd-funding platforms over the long term, a new global survey of CFA members has found.
The survey of more than 3,800 CFA members worldwide found 40 per cent of respondents tipped robo-advice as having the most impact on financial services in five years time. A further 30 per cent picked blockchain technology would cause the greatest disruption to the financial industry in the same time-frame.
Robo-advice scored a similar result (37 per cent) over the one-year period while blockchain was rated below peer-to-peer lending (23 per cent) and crowd-funding (15 per cent) in its potential to disrupt financial services in the short-term.
“… there is 17 percentage point difference of the blockchain technology having the greatest impact on the financial services industry between five years and one year from now, showing that blockchain is nevertheless considered a potential future risk/ opportunity in the medium- to long-term,” the CFA survey says.
Conversely, only 13 per cent of respondents said peer-to-peer lending would be the number one fintech threat in five years with crowd-funding drawing 11 per cent of the CFA vote.
More than half of those surveyed also said the asset management sector would be most affected by the robo-advice revolution followed by banking (16 per cent), securities (12 per cent), and insurance (7 per cent).
Automated tools would both lower the costs and improve access to financial advice, the CFA survey shows, with 90 per cent expecting the former, and 62 per cent the latter.
While slightly over half of respondents said robo-advice would improve product choice only 37 per cent expected consumers would see improved service or a reduction in fraud/mis-selling with the introduction of automated advisory tools.
Robo-advice was also more likely to benefit the mass-market rather high-net worth clients or institutions, the CFA report says.
“Most financial advice tools offer relatively unsophisticated advice based typically on offering a diversified portfolio. It is likely because of this stylised fact that 70% of respondents think mass affluent investors will be positively affected by automated financial advice tools, followed by other investors (67%) and high net worth individuals (41%),” the survey says. “The higher the wealth, the more likely that respondents do not think investors will be affected by automated financial advice tools, which are not yet capable of offering complex, tailored advice.”
Faulty algorithms presented the biggest danger for robo-advice investors, the CFA report says, with 46 per cent rating this the number one risk. Mis-selling (30 per cent) and privacy concerns (12 per cent) were the only other robo-risks explicitly stated in the survey.
Over 40 per cent of respondents said blockchain, the technology underlying digital currency Bitcoin, would have the greatest impact on “clearing and settlement, alternative currencies, and commercial banking”.
Fund administration (33 per cent) and asset servicing (31 per cent) were also ranked up the list of blockchain targets. Asset management (13 per cent) and real estate (9 per cent) were least likely to be disrupted by blockchain innovation, the survey says.
Jeff Stangl, CFA Society NZ president, said while the New Zealand industry was unlikely to be represented directly in the survey, the findings highlighted global concerns.
However, in a statement Stangl said it was unclear if robots would restore the “fragile” level of consumer trust in human financial services identified in an earlier CFA survey.
“FinTech is attracting increasing attention from consumers, investors, the investment management industry and regulators across the globe but there are definitely unresolved issues,” he said. “CFA’s survey confirms the belief that rapid technological innovation has the potential to shape and even disrupt the asset management industry and the industry is not yet convinced that investors will be made unambiguously better-off. Most importantly, the biggest issues in our market, trust and independence, remain unresolved.”