“The buzz around robo-advisers is bringing some much needed energy and interest to an industry that many consumers deem to be opaque and uninspiring,” he said.
“Fees are almost always lower than traditional wealth managers, so robo-advisers will help to fill significant gaps in the market. They cater for the middle-tier or mass affluent investors left behind in the limbos created by the retail distribution review and the rising minimum investment thresholds imposed by some traditional advisers.
“Robo-advisers give consumers direct access to the portfolio management tools that have previously been available only to the traditional advised market.”
But while there does not seem to be anything lacking on the costs side of the equation, Goggin conceded that there is a dehumanised aspect which can negatively impact on client portfolios.
“The removal of human emotion in the investment process can be seen as a positive but there are potential problems when the market changes direction,” he expanded.
“A robo adviser will have rules and must stick to them. This could lead to the automated divestment of some quality assets when a more sensible decision would have been to stay invested to ride out the storm.”
As far as wealth managers are concerned, the outcome of the review could necessitate a significant rethink of their business model if, as feared by some, it heralds a ‘come one, come all’ approach.
“For example, sitting down with a £40,000 client is just not viable; you would be bust in no time,” said Andrew Herberts, head of private investment management at Thomas Miller Investment.
