Macquarie Bank is the latest big brand Australian financial institution to join the robo-advice revolution, according to a report in the Sydney Morning Herald (SMH) last week.
The SMH report says Macquarie would launch the ‘OwnersAdvisory’ investment advice system next month, featuring access to 30,000 underlying products and a flat fee-for-advice structure.
A Macquarie spokesperson told Investment News NZ (IN NZ) OwnersAdvisory would only be open to Australian residents for the time-being. However, the system could “potentially” be rolled out in other jurisdictions, the spokesperson said.
John O’Connell, Macquarie Wealth Management chief investment officer, told the SMH OwnersAdvisory would offer a product-agnostic, personal investment advice service with a flat fee “retail price point”.
After completing an online risk-profile, OwnersAdvisory would suggest a portfolio for clients – although the system wouldn’t take into account factors such as age, tax position or debt. The risk profile was developed by Paul Resnik, who has been hammering away with his risk assessment business for years.
“[OwnersAdvisory] will tell you what actual things to buy, what things to sell, your portfolio tilts and where we think they should be given our views on the outlook for markets, and for economies,” O’Connell told the SMH.
He said the OwnersAdvisory system would be open to all investors, who would have discretion on how to implement the advice.
“They can take that advice and trade on their CommSec account, their Macquarie online trading account … or whoever else they want,” O’Connell is quoted in the SMH story.
Macquarie’s robo-investment solution follows the decision of BNZ parent, National Australia Bank (NAB), this September to launch an auto-advice service. However, NAB’s ‘Prosper’ platform would initially be offered only to the bank’s 40,000 online customers.
Earlier this year Australia’s financial regulator – the Australian Securities and Investments Commission (ASIC) – set up a Robo-advice Taskforce (RAT) to investigate the potential impact of the new advisory technology.
In a November 5 speech, ASIC chief, Greg Medcraft, said the regulator was “very supportive of the automated provision of advice”.
“We see it has the potential to offer a convenient, low-cost advice service to consumers,” Medcraft said. “We also see benefits such as improved compliance and record keeping; and the potential to reduce conflicts of interest.”
However, he said ASIC also wanted to “better understand robo-advice business models” with the RAT currently digging into issues including:
- how robo-advice providers comply with the best interests duty
- how robo-advice providers develop and test their algorithms;
- the training and competency requirements for those sitting behind robo-advice models; and,
- the adequacy of a robo-advice operator’s compensation arrangements.
The potential impact of technology on the delivery of financial advice is also included in the current review of New Zealand’s Financial Adviser Act (FAA).
In their respective FAA submissions, all four of New Zealand’s, Australian-owned, major banks backed the introduction of more flexible rules allowing entities to offer robo-advice solutions.
The BNZ submission, for example, says the FAA provisions that effectively prevent banks from offering online advice need to be reviewed.
“In order to provide widespread, tailored KiwiSaver advice in an online setting, the only effective way of meeting the consumer demand will be for entities to provide advice using information technology solutions,” the BNZ submission says.
Despite skipping the majority of the FAA questions in its submission, the NZ government-owned Kiwibank also advocated for greater freedom to provide online financial advice.
In by far the most wordy of its responses, the Kiwibank submission says: “An empowering experience through digital channels will make financial advice attractive and accessible to a wider audience -including to those who either can’t access it (due to cost or other factors), or who do not want to use the current face to face model (for example because of convenience or hesitation about understanding).”
Financial institutions globally have gone big on robo-advice this year with a flurry of activity, including the purchase of US system ‘FutureAdvisor’ by the world’s largest fund manager, BlackRock, in August