February 11, 2025 • 24 mins
There are a number of ways to get financial advice, from free general advice from your super fund, to a fully customised strategy from a licenced financial planner. But sitting in between those two is roboadvice. Join Canna Campbell - a financial planner for 20 years - and Fear & Greed's Michael Thompson as they look at how roboadvisors work, the benefits, the limitations, and of course, the cost.
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The information in this podcast is general in nature and does not take into account your personal circumstances, financial needs or objectives. Before acting on any information, you should consider the appropriateness of it and the relevant product having regard to your objectives, financial situation and needs. In particular, you should seek independent financial advice and read the relevant Product Disclosure Statement or other offer document prior to acquiring any financial product.
Canna Campbell is a Corporate Authorised Representative and Corporate Credit Representative of Wealthstream Financial Group Pty Ltd ABN 35 152 803 113 Australian Financial Services Licensee AFSL 412079.
See omnystudio.com/listener for privacy information.
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Transcript
Episode Transcript
Available transcripts are automatically generated. Complete accuracy is not guaranteed.
Speaker 1 (00:01):
Welcome to How Do They Afford That? The podcast that
peaks into the financial lives of everyday Australians. I'm Michael Thompson.
I'm a writer and the co host of the podcast
Fear and Greed business news as always, I'm with Canna Campbell,
financial planner and founder of Sugar Mama TV, the financial
literacy platform that is on YouTube, Instagram, threads, TikTok, podcasts,
books everywhere. Really, Hello, Canna, Hello, how are you? I'm good?
(00:25):
Thank you. This podcast we talk a lot about financial advice,
about getting financial advice. Funnily enough, we are very very
very strong advocates for everybody getting financial advice, and we
talk about the fact that there are a number of
kind of tears of advice available, from kind of free
general advice maybe through your kind of super fund for instance,
(00:48):
to a tailored plan, a very specific tailored plan with
a financial advisor. But there is one that kind of
sits kind of in between almost and it's called robo advice,
which conjures up all kinds of images, doesn't it of
a robot and like old school kind of robot, like
(01:09):
maybe Bender from Futurama. Do you remember him?
Speaker 2 (01:12):
No?
Speaker 1 (01:13):
Yes?
Speaker 2 (01:13):
I do. Yeah, yeah, I was really having to go
back far in the memory bank, but yes, I do. Yes.
Speaker 1 (01:17):
So I picture when we're talking about robo advice, that
I'm picturing that that advice is coming from an actual robot.
It is not, but it is something that we get
asked about quite a lot, and we recently had an
email from a listener, Sally, who asked how you go
about finding a good robo advisor? So today it is
(01:41):
robo advice one oh one with Canna Campbell.
Speaker 3 (01:45):
Let's yay, it's a It is one of those topics
that I understand the principles behind it, but I just
I don't understand a few elements of kind of how
do you make it work for you, how do you
find a good advisor, and kind of where it fits
into the grand scheme of financial advice and who it's
(02:08):
kind of suited to.
Speaker 1 (02:09):
I've just given you a bit of a preview as
to all the questions I'm going to ask you over
the next few minutes. But let's start with the very
very basics. What is robo advice and how I suppose
does it kind of differ from your traditional, tailored, in
person human financial advice.
Speaker 2 (02:26):
So robo advice is automated financial advice. It's normally delivered online,
and it's done via like algorithms and AI technology. Okay,
and it is there's no real human touch to it whatsoever.
So we'll go provide you with some recommendation based on
the information that you plug into it, and then it
(02:46):
spits out the financial strategy and even product selection investment
selection for you.
Speaker 1 (02:52):
Okay, So you are still providing a lot of information.
You would still be kind of providing what your goals are,
what your current situation is, probably your risk appetite, and
various so a lot of similar questions to what you
would be answering with a human advisor exactly.
Speaker 2 (03:08):
So there's some question like a questionnaire that's obviously online.
You enter all information and then it will then look
at all your goals and the deadlines for those goals,
and then work out a strategy for you that's legal
and appropriate for what you're trying to achieve.
Speaker 1 (03:26):
And explain why benefit most from this is it someone
who perhaps doesn't have the money saved up ready to
go and spend. I know we've talked in the past
about a human financial planner. I really feel old kind
of having to specify robots and humans. But a customized,
tailored financial plan which might cost somewhere between five and
(03:48):
a half thousand dollars up to kind of twenty thousand dollars.
Is this kind of predominantly a budget thing.
Speaker 2 (03:54):
Look, I would say there's a couple of different categories
that people would fit into that are appropriate for roboadvice.
The first being beginner investors.
Speaker 1 (04:03):
Oh yeah, yeah, so people who've.
Speaker 2 (04:04):
Got say five thousand dollars, they really want to invest,
They're feeling a little bit overwhelmed. They don't want to
go and spend a large amount of money on a
financial plan. Yet this is something that could be really
good for them because obviously it's fairly cost effective, it
can be delivered very quickly, and it can get the
ball running so you don't waste any more time saving
(04:24):
and thinking about what to invest in. So it can
really sort of accelerate your financial planning journey. The other
category I would say is for anyone that is feeling
overwhelmed with personal finances, isn't quite yet ready for a
financial plan erh and a complicated financial strategy. This is
(04:45):
something that's a good way to sort of lean in
an easier way into that journey. Then, I would say
for people the third category is for someone who's got
a fairly simple situation and a very simple financial goal
that they want to achieve. So they just want to
maybe fix this super okay, and this is something that
they are comfortable doing because they just want this addressed
(05:08):
to help suit them for the next couple of years
or so.
Speaker 1 (05:11):
Okay, So you can actually just be really specific and
really targeted with what you're looking for, which is also
something that you can do with a human advisor as well.
Isn't it that you can just go, look, I really
want to focus only on my superannuation, or I really
want to just focus on this particular area of estate
planning at those kinds of things, okay. Is the main
(05:32):
advantage then of using a robo advisor? Is it cost?
Is that the number? Also? I suppose speed, because we've
talked in the past as well about the fact that
a human advisor is going to take time to put
your plan together, and that's what you want because it
shows that they are doing a lot of research and
a lot of work and putting it all together, whereas
a robo adviser would be able to turn something out
(05:54):
pretty quickly, you would think, yeah, definitely.
Speaker 2 (05:57):
So obviously it's very cost effective, it's fast, but also
it's very convenient as well because quite often with robo advice,
the whole process is very seamless, and the once you've
decided you want to implement a lot of those forms
so prepopulated and it's just a matter of it. They
can select all the investments for you. So there's definitely
an element of efficiency there. And then I'd say accessibility.
(06:20):
You know, you don't need to have a large amount
of money to go and engage with a robo advisor platform,
So that really does lower that barrier to entering in us,
I said, it means you're not wasting time, you can
actually start. You know a lot of people think they
have to save up a huge amount of money before
they can see a financial planner. This stops that from happening.
You can literally with five hundred dollars go use a
(06:42):
robo advice platform.
Speaker 1 (06:43):
Okay, the downsides, I imagine one of the big downsides is
a lack of human touch on this. And you talked
actually before when you mentioned that beginner investors or someone
who's not quite ready for all the kind of detail
this might be suited to them, but they will also
(07:04):
miss out on someone kind of holding their hand through it.
Speaker 2 (07:07):
Yeah, and look, you know, as a financial planer, one
of the things I would do to help clients is
stop them making a really bad decision, you know, because
they pick me up and think, oh, I've just heard
about this hot share tip. What do you think? And
you know they're about to spend twenty thousand dollars investing
in This's not I'd say, hold your horses, hang on,
let me go to some research for you, and I'd
stop them from making a disastrous decision. Robo advice won't
(07:29):
do that, you know, so obviously that complete lack of personalization.
You know, and money is a highly emotional subject, you know,
whether you've got lots of money or no money, it
is very very personal. So robo advisors use algorithms and
AI and they recommend these portfolios and these strategies. But
I've said this in the past, you could there are
(07:50):
lots of ways to skin a cat. I don't own
a cat. I'm not a cat person, I will admit,
but you can you know, we will.
Speaker 1 (07:58):
When I was, I have the benefit of people worrying
that you were legitimately talking about skinning cat case. Yes,
I know. I don't think you've cleared that up by
clarifying that you don't own a cat. I think what
you've meant to say was I wouldn't advocate skinning cats,
not I don't own ones, so I'm not going to
skin my own. Ye.
Speaker 2 (08:18):
Sorry, So, as I was saying, you know, when you're
sitting down with a client and you've gone through all
the information and you know there will be say four
or five different options. Now, the number one best strategy
for them may actually not work for their value system
or where they sit with their mindset or what they
may not be ready for that strategy. Yet, there are
(08:40):
some other ones that are a bit more gentle and
easy and a bit more simplistic to follow for the timing,
and we can part that number one idea, you know,
whether they can inform consent, you know, for further down
the track. Robo advice won't necessarily see that, or understand that,
or give that as an option. And this is the
problem when your situation is a bit more complicated and
(09:02):
there are so many different options available, you know, I
would sometimes end up having to sit with a client
and we'd implement the third best strategy because it just
wasn't the other two just weren't appropriate yet.
Speaker 1 (09:13):
Okay, And so it's not necessarily taking in the bigger
picture and not just talking about now, but perhaps not
looking far enough ahead into the future as to what
the evolving kind of requirements of this person or this
family might be.
Speaker 2 (09:29):
Exactly okay, and you know it's they've good all sundstand
what that person is dealing with right now. You know,
it might have For example, someone may have inherited some
money and they you know, ais and this robo advice
is saying, right, you've got to invest in this share
pot follow but that person may not be ready yet
to do that. The second concern I have with robo advice,
(09:51):
and I'd be intrigued to hear if people can relate
to this, how many people who are using robo advice
genuinely understand the advice they've been given. Because it's a
financial planner has to triple check that the client understands
absolutely everything that you're doing with their money.
Speaker 1 (10:14):
Okay.
Speaker 2 (10:14):
They have to understand the risks, the costs, and of
course the benefits of that advice. With robo advice, you
don't have that thorough cross checking examination. How many people
are ticking boxes and signing electronic forms not knowing one
hundred percent really what they're doing and the risks involved
(10:35):
as well as even the benefits. Okay, that's where I
am a little bit more concerned, and.
Speaker 1 (10:40):
That would be a big concern where the suggestions made
by an advisor, whether a human or a robot, is
a more complex one, but probably less of a concern
when you're dealing with very simple options, simple and straightforward,
because it is more likely that the recipient of that
advice is going to understand it because there aren't is
men any kind of variations to it and fill on pieces. Yeah, okay,
(11:04):
how does it actually work? How does it? I don't
even know whether you'll know the answer to this, because
it feels like asking kind of how does the algorithm
work on say Instagram or TikTok, which kind of no
one really knows, But how behind the scenes, how does
a robo advisor actually work? Are they drawing off, say,
for instance, a limited pool of potential outcomes and applying
(11:27):
the information that's put into it by the client through
the questionnaire through the questionnais and then going okay, well,
here are the kind of twenty or thirty different possible outcomes.
I'm going to pick the one that's most suited to you,
is it that simple?
Speaker 2 (11:40):
Look, there's lots of different robo advisors out there, and
at the end of the day, there any as good
as the person who built them in the first place.
Speaker 1 (11:47):
Okay.
Speaker 2 (11:48):
So it's a combination of those things. Looking at the goals,
looking at the deadlines for those goals, looking at the
risk profile, looking at the situation, the age, you know,
the level of existing financial responsibilities, children and so forth.
And then obviously it's you know, once you've put the
more information you can put into it, the better, just
like it would be the more information you can share
with the financial planner. And then it will obviously then
(12:09):
not just pick the strategy, but it also pick the
underlying investments as well. And most often with these robo
or advice platforms, it's really the ETF, so the sort
of underlying investment product, okay, rather than that you know,
a particular share portfolio as such.
Speaker 1 (12:25):
Okay, So looking more at these broader kind of exchange
traded funds that track a certain portion of the market
rather than getting really kind of specific and going this
particular kind of company for instance.
Speaker 2 (12:36):
Yeah, and they will often do the ongoing portfolio maintenance. Again,
this is probably another concern I have because it's called
a sort of harvesting, but they are triggering if it's
something like an ETF, they could be potentially rebalancing the
portfolio without an understanding of the client's tax situation, which
(12:57):
can be very unique and vary from financial year to
financial year. Okay, so that's another issue I have. But
that then also can be mitigated with things like being
able to pick the individual stocks or using something like
a listed investment company where you don't have that churning
of the portfolio.
Speaker 1 (13:13):
Okay, one more question then we'll take a quick break.
How personalized can robo advice be? I'm assuming that again
it comes down to probably how much you're paying for it,
and how detailed the actual platform itself is, and how
much information you put into it that you would get
varying levels of personalization of.
Speaker 2 (13:31):
Your outcome at the end of the day, don't. I
haven't seen enough from robo advice to see it match
the depth of financial planning and personal financial planning. Human,
financial planning human you know, it doesn't factor in things
like you know, planning for a family, changes in your health,
or changes in the health of a relationship, estate planning,
(13:51):
or those very unique important tax strategies that proactive advice
is needed.
Speaker 1 (13:57):
Okay, we're going to take a quick break. When we
come back, I want to talk to you about what
we should be looking for when we are choosing a
robo advisor and how do you actually find the right
one for you, and really as well, how to make
sure that they are legitimate and reputable kind of robots
behind the scenes pulling all the levers. We'll be back
in a second. Cano we're talking about robo advice today,
(14:25):
and we've covered a lot of the pros and cons
of robo advice. We've covered what robo advice actually is,
what should someone look for when they are choosing a
robo advisor, And this kind of gets back to the
initial question from Sally that sparked this episode, kind of
when she wrote to us and said, Hey, how do
I actually find a good robo advisor? Are there any
(14:46):
good ones out there? And if I can ask you
a supplementary question, do they need to be licensed as
their kind of.
Speaker 2 (14:55):
Restrictions most definitely.
Speaker 1 (14:57):
Okay, maybe I was going to qualif by that question
I wasn't. Actually I just but if I are, they
do they come in under the licenses of kind of
bigger organizations. Are they typically advice sections set up within
kind of super funds or those kinds of things, and
therefore covered under their licenses? Take it away.
Speaker 2 (15:18):
Look, robo advice is covered under obviously it has to
be licensed. If it doesn't. If it's not licensed, don't
touch it. Just like you wouldn't see someone for financial
advice that wasn't a.
Speaker 1 (15:26):
Licensed How do you check to see if they're last check.
Speaker 2 (15:28):
On the ACIC website?
Speaker 1 (15:29):
Okay, okay, in exactly the same way as we've as
you search for financial advisors. Exactly, gotcha.
Speaker 2 (15:35):
So above that, you then obviously want to make sure
that the robo advice platform you use is easy to use,
you know, it's intuitive, because otherwise that's going to do
your head in. Also, a wide range of investments, this
is a big one, and this would be a non
negotiable for me. So if I'm only going to be
given five different investment portfolios to choose, from being a
generic growth high growth balanced conservative cash. That does not
(16:00):
excite me at all because that means the advice is
going to be very bland and simplistic. Obviously, look at
the fees, not just the fees to get the initial advice,
but the ongoing fees. Okay, then I would look at
something that can help keep you going. Obviously it's great
to get advice and implement it, but it also needs
to be reviewed. Just like a financial plan, it needs
to be reviewed I would say at least every year,
(16:22):
if not every six months, so that you are progressing.
You even just tick that box by getting that ten
thousand dollars invested or twenty thousand dollars invested, you're actually
contributing to that plan and looking, okay, we've got another
five thousand, what do we do in next So something
that's going to evolve with you. And then of course
having a human behind the computer, you know, be able
to call up and say, hey, I just want to
(16:43):
check this the advice is saying this. Is it possible
to organize a call with someone so I can just
ensure that I understand this or hang on, this doesn't
make sense, or that this looks incorrect. You know, having
that contact can.
Speaker 1 (16:54):
I ask you about that? Are there these hybrid options
out there where it is kind of robo advice with
the human touch.
Speaker 2 (17:02):
Yes, but you may have to obviously pay additional fees.
That fee may be really worthwhile investing in, because if
there is a period of time where the markets are
very volatile and you're seeing the value of your investments
fluctuate and it's making you feel uneasy, the value of
avingble to speak to a human being it can be
well worth it.
Speaker 1 (17:21):
How much are we talking with these and we've talked
before about the human financial advisor ranging from kind of
five and a half thousand up to twenty thousand or more.
How does that compare?
Speaker 2 (17:33):
Well, you can get it as little as a couple
of hundred dollars.
Speaker 1 (17:35):
Okay, that sounds perfect.
Speaker 2 (17:38):
You can get it.
Speaker 1 (17:41):
Excuse me, I know this.
Speaker 2 (17:43):
Is how we talked about the other day, you becoming
me and me becoming you. I'm getting your gut of mind.
Speaker 1 (17:49):
I know you are feeling this podcast with smart I
know I'll try to keep this highbrow. We're talking about
robots here, not filth.
Speaker 2 (17:58):
Well, the cost is obviously going to depend on how
much you want, like what sort of area you want
to cover if it's something very simple and straightforward. You know,
it really can be as little as a couple of
one hundred dollars. But you know, as I said, robo
advice is still a long way to go. It is
very advanced, it's very exciting, it makes it accessible. I
see a lot of ups positive things about this, but
(18:20):
you know, know that it's not necessarily the thing that
you're going to rely on all the way.
Speaker 1 (18:25):
Okay, I don't know whether you're going to be able
to answer this one, but what about risk? What about
kind of so the market there's a downturn, right and
you can pick up the phone to a human advisor
and say, look, the market's just fallen kind of three
percent or four percent in a day, and everyone is
panicking and everyone thinks it's a disaster. And the human
(18:48):
advisor on the other end of the phone is going
to be able to talk you calmly kind of through it, saying, typically,
don't worry you. Remember we're playing a long game here.
How does a robo advisor managed risk, say, for instance,
in a market downtown.
Speaker 2 (19:02):
Well, they you'd be part of a newsletter. So you
receive a newsletter with some educated documents, you know, even
some reports from economists like Shane Oliver from AMP explaining
what's going on in the market, and other obviously financial
experts that would help educate you to help coming on it.
So it's not like they don't there's no one answering
the phone if you did tri and call. Yes, robo
(19:23):
advice understands the responsibilities of educating clients, making sure that
they are informed, they're not making knee jerk reactions that
may come with financial regret. They understand what's going on
the market, and also they can have access to people
who are giving advice from a general point of view
as to what to do in market conditions like this.
Speaker 1 (19:41):
Okay, how then this is the last question that I'm
going to ask you, and it is probably the hardest
one to answer. How do I find the right robo advisor?
Is it a case of because there are so many
options out there, and there are so many and it
is not like this situation when you can just pick
up the phone and have an initial meeting or a chat.
(20:05):
And as you've always encouraged me and everybody listening to this,
you should interview multiple financial planners before you kind of
settle on the right one. How do you do that
with a robot?
Speaker 2 (20:17):
So you need to go through things like comparison websites,
go into reviews, if you can go into any forums
where people have used certain different robot advice platforms, asked
them their experiences. Also, you know, I spoke about fees
and how cost effective this can be. Also find out
what the ongoing fees are and also are they competitive
as well, because you know, people don't realize you've got
(20:38):
to pay for that ongoing service and sometimes you can
opt out of that ongoing service. Is that something that's available.
The other things I'd be looking for are does the
robo advisor provide advice in areas that you need? For example,
you actually may need a fairly comprehensive superannuation strategy that included,
you know, sartary sacrificing and bringing forward caps and contributions.
(21:03):
Find out whether they actually will cover your needs. So
that may mean it costs a little bit more, but
if it means you're getting that comprehensive advice rather than
that kind of generic, one size fits all, which is
not great, that's where you need to sort of start
thinking about. And I ask around just like you would
with the financial plot.
Speaker 1 (21:20):
Yeah, good, word of mouth is important and in comparison websites,
that's an interesting one. What about as well, though, other
organizations and companies that you trust that are in the
financial services space and going and seeing whether they have
a robo advice component. So say, for instance, you're super Fund, Yes,
as an example, and we've talked a lot about super
(21:40):
Fund and the superannuation advice that is available through them,
and say you trust kind of that for instance, and
you know the organization kind of behind it. Is that
something that you can investigate as well, going okay, they've
got the systems and everything set up, they also have
a robo advice component. I will investigate that one.
Speaker 2 (21:59):
Yes, And the key word there is investigate. So I've
said this again and so I've said this before and
I'll say it again. When it comes to trying to
find the right financial planner, I recommend people go and
speak to at least four or five different financial planners.
It's the same with robo advice. Look at at least
four or five different robo advisor platforms to see which
(22:20):
one is right for you. Don't just go, oh well,
I'll just go with my super one that's that there
could be something actually even better and better value than
your superannuation one. Don't just go with the easy, lazy option.
Speaker 1 (22:31):
Okay, there's a lot in this. There is a lot there.
It's an important topic though, because it is it does
kind of fill a gap within the industry, particularly for
people who might have very simple needs or who have
a limit on what they're able to spend on financial advice.
So it's a good topic to be talking about. We've
talked about kind of who it is suited, and it
(22:52):
is suited to those kinds of people. And really the
benefits are that that the cost effective nature of it,
the fact that it is it is fast, it is efficient,
it is accessible. But there are those downsides of the
lack of kind of flexibility and personalization of the advice,
and that it doesn't necessarily take into account the whole
picture and those things that really a computer a digital
(23:17):
kind of assessment obvious situation might not notice, but a
human having the same conversation with you might notice a
changing priority coming for you ten years down the track
and can factor that in. But when you are looking
for a robo advisor that you are making sure that
it is a part of a licensed organization at check Reviews,
check comparison websites. Make sure as well that the fees
aren't disclosed, and that you're able to see how much
(23:39):
it's going to cost works for you, and that they
can specialize in the area that you need advice in
as well. There's no point going to a robo advisor
with very specific kind of requirements and only to find
out that they don't actually cover that in the way
that you need it to. Wow, we've covered some stuff
and you even talked about skinning cats and sex robots.
Speaker 2 (24:01):
I did, I went there.
Speaker 1 (24:02):
Yeah, do you have any regrets? Go say no, say no,
own no, commit You have committed to it entirely, Cana.
If we want any more information on any of these things,
perhaps except for those last two elements, where do we
find you?
Speaker 2 (24:18):
The best place to get in contact with me is
on Instagram at Sugar Mama TV or Canna Campbell.
Speaker 1 (24:23):
Official and you can hear me every day with Sean
Aylmer on Fear and Greed daily business news for people
who make their own decisions. Thank you for listening to
How do they afford that? Remember to hit follow on
the podcast and the best thing that you can do
is tell somebody else send them this episode if they
might be interested in hearing about robo advice. Spread the
word about how do they afford that. Thank you very
much for your company. Join us again next week
Welcome to How Do They Afford That? The podcast that
peaks into the financial lives of everyday Australians. I'm Michael Thompson.
I'm a writer and the co host of the podcast
Fear and Greed business news as always, I'm with Canna Campbell,
financial planner and founder of Sugar Mama TV, the financial
literacy platform that is on YouTube, Instagram, threads, TikTok, podcasts,
books everywhere. Really, Hello, Canna, Hello, how are you? I'm good?
(00:25):
Thank you. This podcast we talk a lot about financial advice,
about getting financial advice. Funnily enough, we are very very
very strong advocates for everybody getting financial advice, and we
talk about the fact that there are a number of
kind of tears of advice available, from kind of free
general advice maybe through your kind of super fund for instance,
(00:48):
to a tailored plan, a very specific tailored plan with
a financial advisor. But there is one that kind of
sits kind of in between almost and it's called robo advice,
which conjures up all kinds of images, doesn't it of
a robot and like old school kind of robot, like
(01:09):
maybe Bender from Futurama. Do you remember him?
Speaker 2 (01:12):
No?
Speaker 1 (01:13):
Yes?
Speaker 2 (01:13):
I do. Yeah, yeah, I was really having to go
back far in the memory bank, but yes, I do. Yes.
Speaker 1 (01:17):
So I picture when we're talking about robo advice, that
I'm picturing that that advice is coming from an actual robot.
It is not, but it is something that we get
asked about quite a lot, and we recently had an
email from a listener, Sally, who asked how you go
about finding a good robo advisor? So today it is
(01:41):
robo advice one oh one with Canna Campbell.
Speaker 3 (01:45):
Let's yay, it's a It is one of those topics
that I understand the principles behind it, but I just
I don't understand a few elements of kind of how
do you make it work for you, how do you
find a good advisor, and kind of where it fits
into the grand scheme of financial advice and who it's
(02:08):
kind of suited to.
Speaker 1 (02:09):
I've just given you a bit of a preview as
to all the questions I'm going to ask you over
the next few minutes. But let's start with the very
very basics. What is robo advice and how I suppose
does it kind of differ from your traditional, tailored, in
person human financial advice.
Speaker 2 (02:26):
So robo advice is automated financial advice. It's normally delivered online,
and it's done via like algorithms and AI technology. Okay,
and it is there's no real human touch to it whatsoever.
So we'll go provide you with some recommendation based on
the information that you plug into it, and then it
(02:46):
spits out the financial strategy and even product selection investment
selection for you.
Speaker 1 (02:52):
Okay, So you are still providing a lot of information.
You would still be kind of providing what your goals are,
what your current situation is, probably your risk appetite, and
various so a lot of similar questions to what you
would be answering with a human advisor exactly.
Speaker 2 (03:08):
So there's some question like a questionnaire that's obviously online.
You enter all information and then it will then look
at all your goals and the deadlines for those goals,
and then work out a strategy for you that's legal
and appropriate for what you're trying to achieve.
Speaker 1 (03:26):
And explain why benefit most from this is it someone
who perhaps doesn't have the money saved up ready to
go and spend. I know we've talked in the past
about a human financial planner. I really feel old kind
of having to specify robots and humans. But a customized,
tailored financial plan which might cost somewhere between five and
(03:48):
a half thousand dollars up to kind of twenty thousand dollars.
Is this kind of predominantly a budget thing.
Speaker 2 (03:54):
Look, I would say there's a couple of different categories
that people would fit into that are appropriate for roboadvice.
The first being beginner investors.
Speaker 1 (04:03):
Oh yeah, yeah, so people who've.
Speaker 2 (04:04):
Got say five thousand dollars, they really want to invest,
They're feeling a little bit overwhelmed. They don't want to
go and spend a large amount of money on a
financial plan. Yet this is something that could be really
good for them because obviously it's fairly cost effective, it
can be delivered very quickly, and it can get the
ball running so you don't waste any more time saving
(04:24):
and thinking about what to invest in. So it can
really sort of accelerate your financial planning journey. The other
category I would say is for anyone that is feeling
overwhelmed with personal finances, isn't quite yet ready for a
financial plan erh and a complicated financial strategy. This is
(04:45):
something that's a good way to sort of lean in
an easier way into that journey. Then, I would say
for people the third category is for someone who's got
a fairly simple situation and a very simple financial goal
that they want to achieve. So they just want to
maybe fix this super okay, and this is something that
they are comfortable doing because they just want this addressed
(05:08):
to help suit them for the next couple of years
or so.
Speaker 1 (05:11):
Okay, So you can actually just be really specific and
really targeted with what you're looking for, which is also
something that you can do with a human advisor as well.
Isn't it that you can just go, look, I really
want to focus only on my superannuation, or I really
want to just focus on this particular area of estate
planning at those kinds of things, okay. Is the main
(05:32):
advantage then of using a robo advisor? Is it cost?
Is that the number? Also? I suppose speed, because we've
talked in the past as well about the fact that
a human advisor is going to take time to put
your plan together, and that's what you want because it
shows that they are doing a lot of research and
a lot of work and putting it all together, whereas
a robo adviser would be able to turn something out
(05:54):
pretty quickly, you would think, yeah, definitely.
Speaker 2 (05:57):
So obviously it's very cost effective, it's fast, but also
it's very convenient as well because quite often with robo advice,
the whole process is very seamless, and the once you've
decided you want to implement a lot of those forms
so prepopulated and it's just a matter of it. They
can select all the investments for you. So there's definitely
an element of efficiency there. And then I'd say accessibility.
(06:20):
You know, you don't need to have a large amount
of money to go and engage with a robo advisor platform,
So that really does lower that barrier to entering in us,
I said, it means you're not wasting time, you can
actually start. You know a lot of people think they
have to save up a huge amount of money before
they can see a financial planner. This stops that from happening.
You can literally with five hundred dollars go use a
(06:42):
robo advice platform.
Speaker 1 (06:43):
Okay, the downsides, I imagine one of the big downsides is
a lack of human touch on this. And you talked
actually before when you mentioned that beginner investors or someone
who's not quite ready for all the kind of detail
this might be suited to them, but they will also
(07:04):
miss out on someone kind of holding their hand through it.
Speaker 2 (07:07):
Yeah, and look, you know, as a financial planer, one
of the things I would do to help clients is
stop them making a really bad decision, you know, because
they pick me up and think, oh, I've just heard
about this hot share tip. What do you think? And
you know they're about to spend twenty thousand dollars investing
in This's not I'd say, hold your horses, hang on,
let me go to some research for you, and I'd
stop them from making a disastrous decision. Robo advice won't
(07:29):
do that, you know, so obviously that complete lack of personalization.
You know, and money is a highly emotional subject, you know,
whether you've got lots of money or no money, it
is very very personal. So robo advisors use algorithms and
AI and they recommend these portfolios and these strategies. But
I've said this in the past, you could there are
(07:50):
lots of ways to skin a cat. I don't own
a cat. I'm not a cat person, I will admit,
but you can you know, we will.
Speaker 1 (07:58):
When I was, I have the benefit of people worrying
that you were legitimately talking about skinning cat case. Yes,
I know. I don't think you've cleared that up by
clarifying that you don't own a cat. I think what
you've meant to say was I wouldn't advocate skinning cats,
not I don't own ones, so I'm not going to
skin my own. Ye.
Speaker 2 (08:18):
Sorry, So, as I was saying, you know, when you're
sitting down with a client and you've gone through all
the information and you know there will be say four
or five different options. Now, the number one best strategy
for them may actually not work for their value system
or where they sit with their mindset or what they
may not be ready for that strategy. Yet, there are
(08:40):
some other ones that are a bit more gentle and
easy and a bit more simplistic to follow for the timing,
and we can part that number one idea, you know,
whether they can inform consent, you know, for further down
the track. Robo advice won't necessarily see that, or understand that,
or give that as an option. And this is the
problem when your situation is a bit more complicated and
(09:02):
there are so many different options available, you know, I
would sometimes end up having to sit with a client
and we'd implement the third best strategy because it just
wasn't the other two just weren't appropriate yet.
Speaker 1 (09:13):
Okay, And so it's not necessarily taking in the bigger
picture and not just talking about now, but perhaps not
looking far enough ahead into the future as to what
the evolving kind of requirements of this person or this
family might be.
Speaker 2 (09:29):
Exactly okay, and you know it's they've good all sundstand
what that person is dealing with right now. You know,
it might have For example, someone may have inherited some
money and they you know, ais and this robo advice
is saying, right, you've got to invest in this share
pot follow but that person may not be ready yet
to do that. The second concern I have with robo advice,
(09:51):
and I'd be intrigued to hear if people can relate
to this, how many people who are using robo advice
genuinely understand the advice they've been given. Because it's a
financial planner has to triple check that the client understands
absolutely everything that you're doing with their money.
Speaker 1 (10:14):
Okay.
Speaker 2 (10:14):
They have to understand the risks, the costs, and of
course the benefits of that advice. With robo advice, you
don't have that thorough cross checking examination. How many people
are ticking boxes and signing electronic forms not knowing one
hundred percent really what they're doing and the risks involved
(10:35):
as well as even the benefits. Okay, that's where I
am a little bit more concerned, and.
Speaker 1 (10:40):
That would be a big concern where the suggestions made
by an advisor, whether a human or a robot, is
a more complex one, but probably less of a concern
when you're dealing with very simple options, simple and straightforward,
because it is more likely that the recipient of that
advice is going to understand it because there aren't is
men any kind of variations to it and fill on pieces. Yeah, okay,
(11:04):
how does it actually work? How does it? I don't
even know whether you'll know the answer to this, because
it feels like asking kind of how does the algorithm
work on say Instagram or TikTok, which kind of no
one really knows, But how behind the scenes, how does
a robo advisor actually work? Are they drawing off, say,
for instance, a limited pool of potential outcomes and applying
(11:27):
the information that's put into it by the client through
the questionnaire through the questionnais and then going okay, well,
here are the kind of twenty or thirty different possible outcomes.
I'm going to pick the one that's most suited to you,
is it that simple?
Speaker 2 (11:40):
Look, there's lots of different robo advisors out there, and
at the end of the day, there any as good
as the person who built them in the first place.
Speaker 1 (11:47):
Okay.
Speaker 2 (11:48):
So it's a combination of those things. Looking at the goals,
looking at the deadlines for those goals, looking at the
risk profile, looking at the situation, the age, you know,
the level of existing financial responsibilities, children and so forth.
And then obviously it's you know, once you've put the
more information you can put into it, the better, just
like it would be the more information you can share
with the financial planner. And then it will obviously then
(12:09):
not just pick the strategy, but it also pick the
underlying investments as well. And most often with these robo
or advice platforms, it's really the ETF, so the sort
of underlying investment product, okay, rather than that you know,
a particular share portfolio as such.
Speaker 1 (12:25):
Okay, So looking more at these broader kind of exchange
traded funds that track a certain portion of the market
rather than getting really kind of specific and going this
particular kind of company for instance.
Speaker 2 (12:36):
Yeah, and they will often do the ongoing portfolio maintenance. Again,
this is probably another concern I have because it's called
a sort of harvesting, but they are triggering if it's
something like an ETF, they could be potentially rebalancing the
portfolio without an understanding of the client's tax situation, which
(12:57):
can be very unique and vary from financial year to
financial year. Okay, so that's another issue I have. But
that then also can be mitigated with things like being
able to pick the individual stocks or using something like
a listed investment company where you don't have that churning
of the portfolio.
Speaker 1 (13:13):
Okay, one more question then we'll take a quick break.
How personalized can robo advice be? I'm assuming that again
it comes down to probably how much you're paying for it,
and how detailed the actual platform itself is, and how
much information you put into it that you would get
varying levels of personalization of.
Speaker 2 (13:31):
Your outcome at the end of the day, don't. I
haven't seen enough from robo advice to see it match
the depth of financial planning and personal financial planning. Human,
financial planning human you know, it doesn't factor in things
like you know, planning for a family, changes in your health,
or changes in the health of a relationship, estate planning,
(13:51):
or those very unique important tax strategies that proactive advice
is needed.
Speaker 1 (13:57):
Okay, we're going to take a quick break. When we
come back, I want to talk to you about what
we should be looking for when we are choosing a
robo advisor and how do you actually find the right
one for you, and really as well, how to make
sure that they are legitimate and reputable kind of robots
behind the scenes pulling all the levers. We'll be back
in a second. Cano we're talking about robo advice today,
(14:25):
and we've covered a lot of the pros and cons
of robo advice. We've covered what robo advice actually is,
what should someone look for when they are choosing a
robo advisor, And this kind of gets back to the
initial question from Sally that sparked this episode, kind of
when she wrote to us and said, Hey, how do
I actually find a good robo advisor? Are there any
(14:46):
good ones out there? And if I can ask you
a supplementary question, do they need to be licensed as
their kind of.
Speaker 2 (14:55):
Restrictions most definitely.
Speaker 1 (14:57):
Okay, maybe I was going to qualif by that question
I wasn't. Actually I just but if I are, they
do they come in under the licenses of kind of
bigger organizations. Are they typically advice sections set up within
kind of super funds or those kinds of things, and
therefore covered under their licenses? Take it away.
Speaker 2 (15:18):
Look, robo advice is covered under obviously it has to
be licensed. If it doesn't. If it's not licensed, don't
touch it. Just like you wouldn't see someone for financial
advice that wasn't a.
Speaker 1 (15:26):
Licensed How do you check to see if they're last check.
Speaker 2 (15:28):
On the ACIC website?
Speaker 1 (15:29):
Okay, okay, in exactly the same way as we've as
you search for financial advisors. Exactly, gotcha.
Speaker 2 (15:35):
So above that, you then obviously want to make sure
that the robo advice platform you use is easy to use,
you know, it's intuitive, because otherwise that's going to do
your head in. Also, a wide range of investments, this
is a big one, and this would be a non
negotiable for me. So if I'm only going to be
given five different investment portfolios to choose, from being a
generic growth high growth balanced conservative cash. That does not
(16:00):
excite me at all because that means the advice is
going to be very bland and simplistic. Obviously, look at
the fees, not just the fees to get the initial advice,
but the ongoing fees. Okay, then I would look at
something that can help keep you going. Obviously it's great
to get advice and implement it, but it also needs
to be reviewed. Just like a financial plan, it needs
to be reviewed I would say at least every year,
(16:22):
if not every six months, so that you are progressing.
You even just tick that box by getting that ten
thousand dollars invested or twenty thousand dollars invested, you're actually
contributing to that plan and looking, okay, we've got another
five thousand, what do we do in next So something
that's going to evolve with you. And then of course
having a human behind the computer, you know, be able
to call up and say, hey, I just want to
(16:43):
check this the advice is saying this. Is it possible
to organize a call with someone so I can just
ensure that I understand this or hang on, this doesn't
make sense, or that this looks incorrect. You know, having
that contact can.
Speaker 1 (16:54):
I ask you about that? Are there these hybrid options
out there where it is kind of robo advice with
the human touch.
Speaker 2 (17:02):
Yes, but you may have to obviously pay additional fees.
That fee may be really worthwhile investing in, because if
there is a period of time where the markets are
very volatile and you're seeing the value of your investments
fluctuate and it's making you feel uneasy, the value of
avingble to speak to a human being it can be
well worth it.
Speaker 1 (17:21):
How much are we talking with these and we've talked
before about the human financial advisor ranging from kind of
five and a half thousand up to twenty thousand or more.
How does that compare?
Speaker 2 (17:33):
Well, you can get it as little as a couple
of hundred dollars.
Speaker 1 (17:35):
Okay, that sounds perfect.
Speaker 2 (17:38):
You can get it.
Speaker 1 (17:41):
Excuse me, I know this.
Speaker 2 (17:43):
Is how we talked about the other day, you becoming
me and me becoming you. I'm getting your gut of mind.
Speaker 1 (17:49):
I know you are feeling this podcast with smart I
know I'll try to keep this highbrow. We're talking about
robots here, not filth.
Speaker 2 (17:58):
Well, the cost is obviously going to depend on how
much you want, like what sort of area you want
to cover if it's something very simple and straightforward. You know,
it really can be as little as a couple of
one hundred dollars. But you know, as I said, robo
advice is still a long way to go. It is
very advanced, it's very exciting, it makes it accessible. I
see a lot of ups positive things about this, but
(18:20):
you know, know that it's not necessarily the thing that
you're going to rely on all the way.
Speaker 1 (18:25):
Okay, I don't know whether you're going to be able
to answer this one, but what about risk? What about
kind of so the market there's a downturn, right and
you can pick up the phone to a human advisor
and say, look, the market's just fallen kind of three
percent or four percent in a day, and everyone is
panicking and everyone thinks it's a disaster. And the human
(18:48):
advisor on the other end of the phone is going
to be able to talk you calmly kind of through it, saying, typically,
don't worry you. Remember we're playing a long game here.
How does a robo advisor managed risk, say, for instance,
in a market downtown.
Speaker 2 (19:02):
Well, they you'd be part of a newsletter. So you
receive a newsletter with some educated documents, you know, even
some reports from economists like Shane Oliver from AMP explaining
what's going on in the market, and other obviously financial
experts that would help educate you to help coming on it.
So it's not like they don't there's no one answering
the phone if you did tri and call. Yes, robo
(19:23):
advice understands the responsibilities of educating clients, making sure that
they are informed, they're not making knee jerk reactions that
may come with financial regret. They understand what's going on
the market, and also they can have access to people
who are giving advice from a general point of view
as to what to do in market conditions like this.
Speaker 1 (19:41):
Okay, how then this is the last question that I'm
going to ask you, and it is probably the hardest
one to answer. How do I find the right robo advisor?
Is it a case of because there are so many
options out there, and there are so many and it
is not like this situation when you can just pick
up the phone and have an initial meeting or a chat.
(20:05):
And as you've always encouraged me and everybody listening to this,
you should interview multiple financial planners before you kind of
settle on the right one. How do you do that
with a robot?
Speaker 2 (20:17):
So you need to go through things like comparison websites,
go into reviews, if you can go into any forums
where people have used certain different robot advice platforms, asked
them their experiences. Also, you know, I spoke about fees
and how cost effective this can be. Also find out
what the ongoing fees are and also are they competitive
as well, because you know, people don't realize you've got
(20:38):
to pay for that ongoing service and sometimes you can
opt out of that ongoing service. Is that something that's available.
The other things I'd be looking for are does the
robo advisor provide advice in areas that you need? For example,
you actually may need a fairly comprehensive superannuation strategy that included,
you know, sartary sacrificing and bringing forward caps and contributions.
(21:03):
Find out whether they actually will cover your needs. So
that may mean it costs a little bit more, but
if it means you're getting that comprehensive advice rather than
that kind of generic, one size fits all, which is
not great, that's where you need to sort of start
thinking about. And I ask around just like you would
with the financial plot.
Speaker 1 (21:20):
Yeah, good, word of mouth is important and in comparison websites,
that's an interesting one. What about as well, though, other
organizations and companies that you trust that are in the
financial services space and going and seeing whether they have
a robo advice component. So say, for instance, you're super Fund, Yes,
as an example, and we've talked a lot about super
(21:40):
Fund and the superannuation advice that is available through them,
and say you trust kind of that for instance, and
you know the organization kind of behind it. Is that
something that you can investigate as well, going okay, they've
got the systems and everything set up, they also have
a robo advice component. I will investigate that one.
Speaker 2 (21:59):
Yes, And the key word there is investigate. So I've
said this again and so I've said this before and
I'll say it again. When it comes to trying to
find the right financial planner, I recommend people go and
speak to at least four or five different financial planners.
It's the same with robo advice. Look at at least
four or five different robo advisor platforms to see which
(22:20):
one is right for you. Don't just go, oh well,
I'll just go with my super one that's that there
could be something actually even better and better value than
your superannuation one. Don't just go with the easy, lazy option.
Speaker 1 (22:31):
Okay, there's a lot in this. There is a lot there.
It's an important topic though, because it is it does
kind of fill a gap within the industry, particularly for
people who might have very simple needs or who have
a limit on what they're able to spend on financial advice.
So it's a good topic to be talking about. We've
talked about kind of who it is suited, and it
(22:52):
is suited to those kinds of people. And really the
benefits are that that the cost effective nature of it,
the fact that it is it is fast, it is efficient,
it is accessible. But there are those downsides of the
lack of kind of flexibility and personalization of the advice,
and that it doesn't necessarily take into account the whole
picture and those things that really a computer a digital
(23:17):
kind of assessment obvious situation might not notice, but a
human having the same conversation with you might notice a
changing priority coming for you ten years down the track
and can factor that in. But when you are looking
for a robo advisor that you are making sure that
it is a part of a licensed organization at check Reviews,
check comparison websites. Make sure as well that the fees
aren't disclosed, and that you're able to see how much
(23:39):
it's going to cost works for you, and that they
can specialize in the area that you need advice in
as well. There's no point going to a robo advisor
with very specific kind of requirements and only to find
out that they don't actually cover that in the way
that you need it to. Wow, we've covered some stuff
and you even talked about skinning cats and sex robots.
Speaker 2 (24:01):
I did, I went there.
Speaker 1 (24:02):
Yeah, do you have any regrets? Go say no, say no,
own no, commit You have committed to it entirely, Cana.
If we want any more information on any of these things,
perhaps except for those last two elements, where do we
find you?
Speaker 2 (24:18):
The best place to get in contact with me is
on Instagram at Sugar Mama TV or Canna Campbell.
Speaker 1 (24:23):
Official and you can hear me every day with Sean
Aylmer on Fear and Greed daily business news for people
who make their own decisions. Thank you for listening to
How do they afford that? Remember to hit follow on
the podcast and the best thing that you can do
is tell somebody else send them this episode if they
might be interested in hearing about robo advice. Spread the
word about how do they afford that. Thank you very
much for your company. Join us again next week
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