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Roboadvice disruption – you won’t see it coming

Cuffelinks’ article, “Scenes from a roboadvice pitch to angle investors” provoked much comment. There was an air of cynicism in the feedback that roboadvice would never really replace current incumbents. The client acquisition costs (CAC) were too high and those with existing franchises would prevail.

But predicting the future is very difficult and even futurists, while entertaining at corporate conferences, have limited success. The Washington Post recently ran an article about what people in the 1900s thought the 2000s would look like. Their predictions were comical.

The financial industry is locked in its current mindset and sees no immediate danger. But we forget that there are many more institutions that touch the mass market, probably materially more effectively than financial service companies. Who said Coles, Qantas or Telstra can’t take a crack at our industry? Roboadvice will materially reduce the cost of entry for many players. Traditional providers will need to be wary of disrupters buying a minority stake in a roboadvice start-up and offering very low-cost product to their sizeable client base.

Here is my prediction how an ordinary person may relate to financial services in the near future, having been tempted away from traditional providers. As with the people in the 1900s, my imagination is constrained by what I know is technologically available now. But there is a huge amount being refined by the day.

A glimpse at a possible future for Tracy

It’s raining outside as Tracy catches the 400 bus from Randwick Hospital to Bondi Junction. It’s been a long shift as a nurse, her energy spent on a full ward with the usual number of distressed patients and family.

Sitting on the bus Tracy looks at her iPhone and sees a few messages from friends and a couple of notifications on NursePlus. The first notification advises Tracy of new job positions at the nearby St Vincent’s Hospital and the second notification tells her that her total wealth changed by $3000 last month and to click through to see why.

The NursePlus app is an increasing favourite of Tracy’s since she downloaded it three months ago. Her friend recommended it to her and by registering Tracy was in the draw for two tickets to the upcoming Cold Chisel concert.

NursePlus keeps Tracy in touch with the major events occurring in her industry including changes in accreditation rules, union activity, and nurse discussion blogs and chats. Tracy particularly likes the special deals, including discounted tickets, Coles specials and women’s fashion.

NursePlus shows how Tracy and her husband spend their money in an easy to understand way. She is impressed with NursePlus’s ability to combine transaction data from her Credit Union with those from her husband’s Westpac account. As she thumbs through the expenditure categories Tracy realises how much repairs and maintenance are now costing on the second car. “Time to sell”, she thinks.

No wonder NursePlus is prompting her to save more if she wants to retire at 65. That’s only five years away. Tracy has played with NursePlus’s retirement tool and realised she could come up short. NursePlus has shown her she has at least a 25% chance of not having sufficient superannuation if she wants to go on her overseas trips every three years and give $50,000 to her daughter to help with her house deposit in a couple of years’ time.

Tracy decides to transfer her super to NursePlus. She thinks, “Why not?” Tracy never visits her old superannuation fund website and NursePlus seems more in tune with her personal and financial needs. Tracy could never afford one of those fancy financial planners and NursePlus provides all she needed.

To move her super, Tracy uploads a picture of her driver’s licence and Nurse’s ID. She electronically signs her authorisation to allow NursePlus to manage the funds transfer. With a push of a button Tracy knows NursePlus will handle all of the paperwork. These days, electronic signing and authorisation make life so much easier, she thinks.

Tracy feels in control

For the first time in her life, Tracy feels in control of her finances. She can see where she can make savings and if she is on track to retire. She can see on one screen what she has in the bank, super fund, term deposits and that rental property she owns. She can even see her frequent flyer miles and flybuys.

Tracy sees another notification from NursePlus. There is a ‘two-for-one’ offer at the Event Cinema at Bondi Junction. She hits the button to buy the tickets. Tired as she is, a night out at the movies sounds great. As Tracy relaxes on the bus, she wonders if her husband has signed up to BusinessPlus, the accounting app she showed him.


Donald Hellyer is Chief Executive of BigFuture. See

October 21, 2015

The thinking behind the NursePlus example is only minutes into the future.
• Does an app engage and build trust as well as a face-to-face engagement? Maybe in conjunction.
• It may be that government decide to the aggregator of information and wealth for it's citizens (more palatable that financial institutions regularly failing).
• Are the large tech companies best place to aggregate and influence (AAPL, MSFT, GOOG)?
• Timely information is important, technology delivers this. Can it change human behaviour that leads to procrastination over whether to move from your existing underperforming fund to the one being spruiked by the latest app (or Facebook/Twitter/Snapchat/Insta/LinkedIn replacement).

October 20, 2015

I'm not saying it's a showstopper, but no one has mentioned advice regulation in all of this. Each time NursePlus prompts some financial advice, is it accompanied by a Statement of Advice, with associated disclosure of fees, assumptions and disclaimers? If she is unhappy with the advice, who does she talk to?
Related to this, small start-ups may decide they can afford to push the envelope on whether they cross regulatory boundaries, but established advice providers have reputations to protect.

Donald Hellyer
October 22, 2015

Richard, my understanding is that ASIC is both concerned about Roboadvice but also appreciates that this technology is here and can make a positive contribution. We will watch this space with interest

October 19, 2015

I think the interesting thing here is that technology will deliver real-time information to Tracy directly. Add a range of enhanced support tools, and straight-through-processing, and Tracy will be able to make her own decisions.

This will apply especially well to presently disengaged accumulators.

For retirees there will continue to be a need to have an adviser to assist with the behavioural components. Roboadviser won't be able to stop individuals from making silly and reactive investment decisions or from complex family issues (estate planning, etc).

The future adviser will be a trusted consultant and custodian, not a product pusher. There will be scope for junior transactional advisers but they will need to be aligned with major institutions who have the systems to manage and deliver volume.

Donald Hellyer
October 20, 2015

John, I think you are spot on. But we need to create an environment where advisors aren't product pushers....and that advisor alignment with a large bank or insurance company wont help

October 16, 2015

If I was a nurse I would join NursePlus. Communicates on day to day matters, encouraging and inclusive for those who lead ordinary lives. So much more than superannuation which is remote for most of the population.

Greg Einfeld
October 16, 2015

Thanks Donald for the article.

This is exactly where robo advice is heading. Nurse Plus will be able provide much better advice than the average human adviser because it has so much more information about Tracy and her financial situation.

Jason P
October 16, 2015

Nice article. Donald I think you've captured much of the problem.

A few quick comments on robo-advice more generally.

1. First wave innovations rarely nail it. That's as true in products (anyone remember the Creative NOMAD?) as it is in services (e.g. AltaVista). The machine gets better. While 'robo' today doesn't compare to a full service advisor, it's not much of leap to think that over the next decade these automatic models will become increasing sophisticated. Most of the arguments I hear to the contrary are a version of 'financial advice can't be codified', that seems logically weak to me. Who knows how long it'll take but it will happen. Most of the debate re: robo massively over estimates the short run impact and significantly underestimates the longer term impact. The most similar example I can think of is the landmark changes that have occurred in the medical world, largely thanks to Atul Gawande (see The Checklist Manifesto).

2. Automatic advice ? digital advice. In discussions around robo there doesn’t seem to be much distinction between the automation of advice (via an algo) and delivery of advice online. It’s very likely that we see the growth of the ‘hybrid model’ – similar to ‘bricks and clicks’ in retail.

3. Commodities have no pricing power. The price of executing a simple ETF portfolio has to trend to zero. The fact that most robo players are charging >80bps for execution and management of an ETF portfolio plus the underlying product cost is very aggressive, prices will fall.

4. CAC. Yes, most start-ups don't have a clue about this kind of stuff. But neither do the rest of us. And it matters. I wouldn't underestimate the lack of sophistication when it comes to digital marketing in financial services, nor the ability for tiny start-ups to come in and leap frog incumbents that should have plenty of advantages. Long term there’s no real advantage in this kind of stuff, but it can give a company a lead.

5. Start-ups (mostly) approach problems in the right way. They start with a customer problem, and work backwards. Sure, most will fail miserably, but it’s something we need more of, and something most of us could get better at.

Donald Hellyer
October 16, 2015

Spot on Jason. Robo will get better and evolve to where the market will pay for it. But the service could be very very cheap. There is going to be two markets...mega (eg BT Finance >$500 mill) and small >$2.0 million. My guess is the small will win but hard to say when.

Rashmi Hansi Mehrotra
October 16, 2015

It's time our industry thinks about business models that are not linked to product. NursePlus could provide financial education and reporting services, perhaps at a much lower cost driven by technology. Why should they resort to clipping the ticket from transactions or AUM-based product fees? Maybe personalised robo-advice is hard, but general robo-education is not.

Gary M
October 15, 2015

NursePlus is not roboadvice. It sounds like a site that makes its money clipping the ticket on 3rd party products it promotes, and is probably a loss leader for its real business – the super fund. So it is not roboadvice or any advice – it’s a product selling site.

Donald Hellyer
October 15, 2015

Gary, The point is that advice need not be separated away from other activities. Tracking your money, becoming more financially literate and planning the future could (not will) be blended in with other activities you enjoy. What reason does an individual have to visit their superannuation website? Not many, so superfunds dont have the opportunity to influence the vast majority of their members.

Tim Richardson
October 15, 2015

Donald - Thanks for the article.
Agree that the winners in the future will be those that are able to harness digital technology to create value in terms of meeting financial objectives rather than through relative performance and by sharing genuinely valuable insight that addresses individual pain points.
The mass investment market in Australia is highly cost sensitive and its appetite for ongoing investment advice will be much reduced compared to the past. The need for advice certainly remains but it is being disaggregated and will be delivered in different formats by different actors along the value chain.

Gary M
October 15, 2015

The acid test for “roboadvice” or any advice is this:– “Does it recommend products it doesn’t make money off?” – Same test for human “advisers”. Too many "advisers" are merely sales reps for products they make money (or “training” trips to Bali, etc) selling.

Donald Hellyer
October 15, 2015

That is an interesting thought. Is it possible for say an AMP aligned planner to recommend an MLC product?


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