Milford Asset Management has joined the robo-revolution becoming the eighth NZ provider to earn a digital financial advice licence.
Murray Harris, Milford head of KiwiSaver and distribution, said the $8 billion plus boutique fund manager was on track to launch its new home-built digital advice system by mid-year.
“We want to complement the human advice capabilities for our KiwiSaver members,” Harris said. “We’ve got 36,000 members in our scheme and we can’t provide face-to-face advice to all of them.”
The firm opened an advice channel for high-balance KiwiSaver members last year, providing access to Milford’s growing network of authorised financial advisers (AFAs).
“We’re still trialing the face-to-face KiwiSaver advice with different cohorts to build a picture of where the demand is,” he said. “But our KiwiSaver members have been asking for tools to help them choose an appropriate fund. We wanted to build something that was more than just a risk-profiler and calculators.”
Harris said after investigating a number of global off-the-shelf alternatives Milford decided to build its robo-advice system in-house.
“Using an offshore robo-advice system there would still be a lot of engineering to fit to NZ, so we thought we might as well build it ourselves,” he said.
Milford planned to roll out the digital advice offer in “a staged approach”, Harris said, starting with staff and family and friends before opening it up to its wider KiwiSaver membership.
“Ultimately, we’d like to make it available to the public but for now we’re focusing on our own members – we already have a lot of details about them that can be pulled into the advice engine,” he said.
The Milford robo-advice process would guide members to an appropriate KiwiSaver fund based on risk profile, goals (essentially, retirement or first-home purchase) and other factors.
“For example, it might recommend members have to take more risk or contribute more – or a combination of both – to meet their goals,” Harris said. “And if they choose to take the advice, members can just click and switch funds. It also issues a statement of advice.”
The robo-adviser would create KiwiSaver final lump sum and retirement income estimates.
He said the imminent robo-advice service adds another layer to Milford’s in-house AFA and independent financial advisory (led by Michael Robson) distribution channels.
Milford employs about 12 AFAs and a similar number of private wealth ‘associates’. Most Milford advisers are in Auckland with a smaller South Island representation. Earlier this year the manager also began a recruitment campaign for AFAs to establish offices in six other regions. However, Milford has yet to appoint any regional AFAs with hiring efforts stalled during COVID-19 lockdown.
Issued under the standing Financial Markets Authority (FMA) robo-exemption, Milford follows fellow established fund managers Kiwi Wealth and Nikko Asset Management into the digital advice arena.
Like Milford, Kiwi Wealth designed its robo-advice system for existing KiwiSaver members while the Nikko ‘GoalsGetter’ service is open to all.
Nikko chief, George Carter, said about 20 financial advisory firms have just begun using GoalsGetter for certain client groups. Under the arrangement, end clients can authorise Nikko to pay adviser fees.
“We’re just starting to see a few clients come through that channel now,” Carter said.
But it’s been a hard slog for the robo-centric KiwiSaver schemes. Almost two years since launch Nikko has collected less than 100 KiwiSaver members while Kōura Wealth, which went live with its robo-advice scheme last October, reported membership of about 130 as at the end of March.
The other KiwiSaver-focused robo-advice provider, National Capital, recently hired an investment research lead, David Anamosa, suggesting there is some demand in the sector. National provides financial advice on a number of schemes that remunerate by commission.
Anamosa would be “helping National Capital refine our advice model which uses principles of behavioural finance and good investment research to empower New Zealanders to get better outcomes from their KiwiSaver investments”, the firm said in a release.
Direct fund platform and now NZ share broker, Sharesies, also holds a robo-advice licence along with two life insurers, Cigna and Pinnacle.
The FMA fast-tracked the exemption early in 2018, allowing providers to bypass the current legislative restrictions limiting personalised financial advice to humans only. Robo-advice, however, is permitted under the delayed Financial Services Legislation Amendment Act (FSLAA) regime.
The FSLAA two-year transitional licensing period start date has been postponed to at least next March, nine months past the scheduled June 29 kick-off point.