We note that no Australian regulation explicitly prohibits a firm offering ‘general financial advice’ but not ‘personal financial advice’ from being called a robo adviser. However, we at QuietGrowth consider it prudent not to use the term ‘robo adviser’ for a firm that offers only ‘general financial advice’ digitally and not ‘personal financial advice’.
According to the Australian regulatory authority ASIC, digital advice or robo advice or automated advice is the provision of automated financial advice using algorithms and technology and without the direct involvement of a human adviser.
Reason for our view:
Some industry observers refer to firms offering financial products online (thus, ‘general financial advice’) as robo advisors, even though those firms do not provide ‘personal financial advice’ digitally.
We at QuietGrowth are of the view that such firms should not be described as robo advisers. We believe that the term robo adviser is best reserved for firms that provide ‘personal financial advice’ digitally. Our reasons are:
- Using the term robo adviser for firms that provide only ‘general financial advice’ can leave consumers unclear about the nature and scope of the service they will receive. This is particularly concerning when many consumers already find it difficult to distinguish between ‘personal financial advice’ and ‘general financial advice’.
- The word “adviser” in the term “robo adviser” can reasonably lead consumers to expect a recommendation tailored to their personal circumstances. Describing a firm that does not provide personalised advice as a robo adviser may therefore create the impression that its recommendations take the consumer’s personal circumstances into account.
“Traditional robo advisor” — it is not a term at all!
Some investment platforms and micro-investing platforms describe themselves as robo advisors even though these platforms do not provide personal financial advice digitally. To reinforce their self-description, these firms sometimes call the robo advisors that provide personal financial advice ‘traditional robo advisors’, while describing themselves as ‘robo advisors’. This marketing practice is undesirable because it can confuse consumers.
Refer to our Robo advice for your wealth management page for more information.
Also read the answers to the related questions:
- Does a robo adviser give personal financial advice?
- What is the difference between robo advice, digital advice, and automated advice?
- Can a firm that sells investment portfolios online be called a robo-adviser?
Additionally, you can consider to read the following knowledge resource:
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