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Robo-advice to flourish in low-return environment
Robo-advice to flourish in low-return environment
The current volatile and low-growth investment environment is likely work in favour of robo-advice tools, says Ignition Wealth.
Ignition Wealth chief executive, Mark Fordree, said that due to the continued expectation of low returns throughout 2016, financial advisers will be under pressure to substantiate their value.
"Since 2011 the market rose 50 per cent to its peak in November last year. I think when people are making good money out of a market they don't really focus too much on what it's costing them," Mr Fordree told Adviser Innovation.
In any industry, automation simply reduces costs, he said, noting that because most robo-advice tools generate a portfolio based on exchange-traded funds (ETFs), consumers receive a diversified portfolio at a discounted price when compared with other investment options.
"The reason why we're seeing such success in ETF growth is simply because they are dramatically more diversified as a product for the fraction of the cost," he said.
Ignition Wealth's robo-advice platform, according to Mr Fordree, matches a client's risk profile to a suitable ETF portfolio. The customer can, however, override the selection by choosing a portfolio that is either 'riskier' or 'less risky' based on their own discretion.
Commenting on Ignition Wealth's current business position, Mr Fordree said the company is in a more stable position, particularly when compared with other robo-advice start-ups.
The technology arm of the company has provided technology-based tools to super funds like HESTA, Care Super and IFS for the past six years. Mr Fordree said this allows it to develop and fund its robo-advice arm from an already established and reliable revenue stream.
"We're very well placed to take advantage of the fact that we're a little more advanced than most [robo-advice firms]," he said.
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