A senior financial adviser at a leading accountancy and advice firm says a “one-size-fits-all” approach will put consumers at risk.
Robo financial advice is one of the fastest growing digital disruptors in the international finance sector, but concern over automated advice is growing.
Adrian Frinsdorf, Wealth advisory director at William Buck, says robo advice can be a useful tool for financial advisors and savvy consumers, however amateur consumers should “steer-clear” of automated services.
“We’re all aware of digital disruption, and in most cases it’s a good thing,” Frinsdorf said.
“But I think consumers should be cautious when digital products are claiming to offer impartial consultation in the financial sector – particularly when owned and implemented by product providers.
“When it comes to finances, the consumers who are looking for cheap outcomes are usually those who can’t afford for things to go wrong – so unless you’re a sophisticated investor, my advice would be to steer-clear of automated services.”
Frinsdorf told Key Media that an amateur investor’s lack of understanding about risk will be a major risk factor when it comes to robo financial advice.
“The major risk is [consumers] really understanding that the information they give will determine the outcome. Sometimes – and I’ve looked at a number of the robo advice platforms – some of the questions can be misleading. They’re open to interpretation and I tend to find that individuals can be very optimistic about their situation.”
“In the end, a lot of them ask to [the consumer] determine their risk profile – would they prefer to make 20% or 5%, and most people are going to answer 20%. The danger though, is to try and achieve 20% they have got to take a large amount of risk. My view is that individual investors just do not understand risk.”
Adrian Frinsdorf, Wealth advisory director at William Buck, says robo advice can be a useful tool for financial advisors and savvy consumers, however amateur consumers should “steer-clear” of automated services.
“We’re all aware of digital disruption, and in most cases it’s a good thing,” Frinsdorf said.
“But I think consumers should be cautious when digital products are claiming to offer impartial consultation in the financial sector – particularly when owned and implemented by product providers.
“When it comes to finances, the consumers who are looking for cheap outcomes are usually those who can’t afford for things to go wrong – so unless you’re a sophisticated investor, my advice would be to steer-clear of automated services.”
Frinsdorf told Key Media that an amateur investor’s lack of understanding about risk will be a major risk factor when it comes to robo financial advice.
“The major risk is [consumers] really understanding that the information they give will determine the outcome. Sometimes – and I’ve looked at a number of the robo advice platforms – some of the questions can be misleading. They’re open to interpretation and I tend to find that individuals can be very optimistic about their situation.”
“In the end, a lot of them ask to [the consumer] determine their risk profile – would they prefer to make 20% or 5%, and most people are going to answer 20%. The danger though, is to try and achieve 20% they have got to take a large amount of risk. My view is that individual investors just do not understand risk.”
