Investors aged under 30 are more likely to trust financial advice delivered by robots than humans, an in-house Minter Ellison Rudd Watts (MERW) survey has found.
After surveying 80 of its lawyers aged less than 30, with further detail supplied by a focus group of six, MERW concludes “automated online platforms are the best way to provide personalised financial advice” to this generational cohort (often referred to as ‘millennials’).
MERW used the survey as the basis for its submission on the Financial Advisers Act ‘Options Paper’, focusing exclusively on proposed changes to robo-advice rules.
“In a generation where people use social media apps to find their life partner, [respondents] told us it was unlikely they would sit down with an AFA [authorised financial adviser] to make financial decisions,” the MERW submission says. “… Our focus group told us that from the Millennial Professional’s perspective, personalised financial advice provided by natural persons are not only not seen as better than an automated online platform, but are seen by them as less reliable and more susceptible to human error and misunderstanding of an individual’s mentality and motivation.”
The MERW submission says, in fact, one of the main reasons the so-called millennial professionals rate robo-advice as attractive is because they “do not have to speak to an actual person”.
But in addition to the perceived greater reliability and trustworthiness of robo-advisers, the MERW submission says millennials also expect the automated advice process to be cost-effective.
“Our focus group all had some savings and were interested in the best ways to manage their money and to invest it in higher return financial products but the idea of paying potentially hundreds of dollars for financial advice did not make financial sense to them,” the MERW paper says. “It would take a long time for any investments to recover that cost.”
The MERW submission supports the FAA reform proposal to licence stand-alone robo-advice platforms under the same terms as human-based services.
“Any regulatory changes should support innovation in the industry and future proof the regime to allow further developments in technology,” MERW says. “On that basis, we consider a hybrid approach, where after using an automated platform the consumer must be given the option to talk to an AFA, to be inappropriate.”
According to the submission, robo-advisers should be permitted to deliver a full range of financial advice rather than simply offering generic directions.
“… restricting automated online platforms to only providing class advice… creates a risk that permitted class advice will be stretched further and further until it becomes effectively personalised advice disguised as class advice,” the submission says.
The MERW paper – signed by partner, Lloyd Kavanagh, and solicitor, Tina Xu – says the interests of older generations would likely have been well-covered in most other submissions on the FAA review.
“Accordingly, we decided our best contribution to the reform process would be to look at the FA Act review from the perspective of young working law graduates, who have yet to purchase their first home,” the submission says. “They are, we believe, a proxy for a wider group whose interests are vitally important in the longer term…”