The Difference Between Robo-Advice and Digital Advice
When digital advice first launched in Australia, providers were constantly asked .. “So you offer Robo-Advice?” To which the reply was always: Most definitely not!
The misconceptions around digital advice remain in some quarters, so it’s worth revisiting the nature of robo and digital advice, and how they relate to comprehensive – human – advice.
The comparison below looks at the key characteristics of, and differences between these three types of advice, in terms of their delivery, customisation, and the degree of human interaction.
| Advice Type |
Characteristics |
| Robo |
- Automated: Robo-advice is provided through digital platforms or apps that use algorithms to assess a person’s financial situation and goals, then recommend only investment strategies or financial products.
- Cost: Typically more affordable than comprehensive advice because it involves minimal human intervention, e.g., up to $300
- Scalability: It can handle large numbers of clients simultaneously, making it accessible to a wider audience.
- Standardisation: The advice given is often more generalized, based on predefined models and data, which may not fully account for complex individual circumstances.
- Limited Customisation: While robo-advice can adjust recommendations based on the data you provide, it lacks the ability to consider nuanced situations or provide highly personalised advice for investment only, beyond what is programmed into the system.
- Accessibility: Available 24/7 and is typically very user-friendly, often aimed at younger, tech-savvy individuals or those with simpler financial needs.
- Delivery Time: The advice delivered via Robo is provided very quickly – usually within 30minutes
- Lacking: The ability to deliver any form of personal advice – there is no human interaction.
|
| Digital |
- Objective: To mirror the advice process delivered by a human financial adviser and offer personal affordable advice.
- Customisation: Rules based – using algorithms and calculation engine to recommend the most appropriate financial advice topic that is in the best interest of the client. Digital advice has progressed to now offer advice solutions across the range of financial areas, including: Superannuation, Investment, Insurance, as well as Pre-retirement and Retirement Income.
- Personal: Digital advice delivers personal advice and can be used by an AFSL to offer the advice under its own licence or via the digital advice provider such as moneyGPS.
- Cost: As with Robo advice, digital is very affordable to the mass market at prices starting at $55 per topic.
- Hybrid human option: A critical aspect of digital advice is that some providers do offer access to a human specialist who assist the client along their advice journey which may include; Starting an SoA, validating their responses to the fact-find, or undertaking advice implementation of the advice recoiemnadtion, or simply answering questions
- Accessibility : Available 24/7 and is typically very user-friendly, and attracting users form the younger, tech-savvy individuals, those that have simpler financial needs as well as a growing number of pre-retirees.
- Scalability: It can handle large numbers of clients simultaneously, making it accessible to a wider audience. Users of digital can also scale their businesses by integrating digital advice into their referral partner networks.
- Delivery Time: Once the digital fact-find is completed and the algorithm has assessed a clients situation, a user could complete an SoA within a few minutes.
- Ongoing support: Some digital providers who offer Hybrid-Advice also provide for ongoing review meetings.
- What digital advice doesn’t do … yet:
– Offer complex multi-topic advice – digital offer single topic or scaled advice but will eventually have the capability to offer comprehensive personal advice in the near future.
– Use AI to determine advice recommendations: As a rules-based industry, using AI is risky as the tech is always learning and may not adhere strictly to the regulatory requirements that an AFSL must adhere to. Hence the use of rules-based algorithms and stochastic based calculation engines. |
| Comprehensive |
- Human Interaction: Comprehensive advice is delivered by a financial adviser, who uses their expertise to offer tailored multi-topic recommendations based on the individual’s specific financial situation, goals, and preferences.
- Higher Cost: Due to the time and expertise involved, comprehensive financial advice is considerably more expensive. According to Adviser Ratings, the median fees are approx. $4.5k for a comprehensive plan.
- Customisation: The advice is more customised, taking into account nuances such as emotional preferences, risk tolerance, and long-term goals.
- In-Depth Planning: Personal advisers often work with clients on a broader financial plan, including estate planning, tax strategies, and retirement planning, and can adjust recommendations as life circumstances change.
- Delivery Time: Can take up to several weeks for a comprehensive plan to be produced and presented to the client.
- Ongoing Support: Personal advisers also offer continuous guidance and adjust advice as market conditions or personal situations evolve. Fees would average at least the cost of the initial plan.
|
Looking at it another way the spectrum of advice models can be summarised as follows.
The growing use of ‘Hybrid’ Digital-Human Advice.
- The Hybrid ‘Digital-Human’ option is becoming more important in offering an experience that delivers the best of the tech with a human element – a critical and a key differentiator in delivering digital advice globally.
It has to be remembered that the great majority of users of digital advice come from a background of:
- having minimal and simple advice needs,
- limited financial literacy,
- a lack of familiarity with digital advice tools
- have never met a financial planner
- All of which means their capability to truly self-serve is also questionable. The hybrid human-digital option offers the affordability benefits of digital, with the ‘safety-net’ of having human support and guidance.
Key take-aways
To summarise, the key differences between Robo-Advice and Personal Advice provided by Digital means lies in the following key areas:
- Degree of Personalisation: It is minimal for Robo as it only covers investment advice, however is fully personal advice via Digital.
- Level of Human Involvement: It is Nil for Robo but available via Digital.
To learn more about MoneyGPS & digital advice, view our Solutions Showcase in the AdviceTech feed of Ensombl.
About moneyGPS: For further information about the moneyGPS Digital Advice offering please contact:
- George Haramis, CEO
- Mobile: 0410 590 526
- Email: george@moneygps.com.au
- Call: 1300 24 24 42 to speak to our Concierge Team.
