So much like the rest of society at the moment, the investment advisory and portfolio management industry is facing disruption much like Uber has to transport and Xero has to Accounting reports. The idea that you can direct funds to an online platform and they will allocate these for you in line with your risk profile and financial goals really is going to be a game changer for the investment world.
I have actually gone and placed money into platforms such as Acorns and the Westpac owned BT Go - Invest and the process was really easy and simple to use. With the Acorns account, you simply link a nominated transaction bank account and Acorns will "round-up" any of your transactions to the nearest dollar and invest it into your nominated investment account. Brilliant. You can grow your wealth with very little pain. It is low cost, simple market linked investments and all the important parts such as regular buying and re-balancing is taken care of for you. I think it is an awesome way for somebody to get their financial goals on track.
So, what are the pitfalls? Well, you can only open an account in one name. You can't have a joint account, family trust or super fund so these accounts don't really cater for complex situations. None at all really. I think though that this is the beginning of the evolution of these technology based platforms that will reduce costs for the investor and offer efficiencies that generally haven't been available to retail investors until now. The traditional "Wrap" platform which accounts for about 75% of all managed money holdings in superannuation and non-superannuation investments have been able to offer these efficiencies but with an advisory component. That is, under the advice of an authorised Financial Planner, you could undertake these transactions.
So if these new platforms can do this work then why would you retain the services of a Financial Planner?
I am totally at ease with the introduction of robo-advice. I don't feel threatened at all by this wave of technology encroaching on my patch. I believe that it will develop and grow and that only means better outcomes for investors and efficiencies for financial planning firms. The reality is that proper Financial Planning is so much more than investment management and picking a beautifully diversified ETF portfolio.
The foundations of a goals-based Financial Plan always begins with risk management. In the event of a major illness, injury or death, what plans have you got to protect yourself and family financially if something happened? Nobody walks into my office to "buy" a portfolio of policies covering off on all of the risks that may occur. A software programme will never convince you of the need to have a policy to ensure your wealth creation plans stay on track.
Discussing with young families who the Guardians for their children would be in the event that both parents are deceased is a very confronting conversation to have. You require empathy and understanding to help people make these decisions. Tidying up the transition of wealth cannot be done with an algorithmic formula much like Google uses in their search bar.
The relationship that we have with our clients is personal, tailored and sometimes difficult.Our role is to keep them on track if their behaviour is sabotaging their future outcomes. The Financial Planners ability to guide and direct their clients to achieve optimum outcomes is what differentiates us from the robo advice options.
If you have significant goals to achieve like building a nest egg to outlive 30 years of retirement then I believe your needs are best met with the assistance of a qualified and experienced Financial Planner. The fee for them to get you to where you want to be will only ever be a fraction of the outcome that you will achieve.
So in essence, Financial Planning is so much more than picking stocks or a fund. We celebrate victories. We encourage in tough times and offer help when your chips are down. We understand where you are because we have been there also. We motivate and challenge you to be better because we want to be better as well. We are a community of people living life here, NOW, wanting to make the best decisions for our families and ourselves. Wanting to make smart decisions with our money not because we are greedy, but because we know that it drives the life and goals that we want to achieve. Having enough is way better than not having anything.