Time will come eventually

 

When it comes to making big, stupid, regrettable predictions, I’d like to think I don’t have too much to be embarrassed about.

Sure, like everyone, I’ve made some dumb calls. Particularly when it comes to technology.

In 1997, I said that I would never need an “e-mail” address. In 2002, I said I’d never watch TV on a mobile phone.

As late as 2006, I was still claiming that I’d never prefer to read my news online. Physical newspapers and magazines for me.

So, with that in mind, I’ll head out on a limb with regards to “robo advice”.

It’s a decade before “robots” are going to going to be of any real value to anyone needing more than pure investment advice.

(Like Sean Connery, I’ve now learned to never to say never again.)

Robo-advice, right now, is little more than a sales tool for investment houses and platform managers. Answer a few questions on a website about your risk profile, then be spat out a pre-mixed basket of investments.

That’s all robo advice is, as it stands, in April 2016.

It won’t help you with suitable tax, super or retirement strategies. It won’t help you pick the most appropriate super fund – because self-interested investment managers are building the earliest advice “robots”.

It won’t help you maximise your tax position in the run up to retirement, while planning the best outcomes for transition to retirement and pension strategies, selling the right assets to get money into super and making the important decision on whether to pay money into your mortgage or superannuation, ahead of retirement.

It won’t be able to help you get the right insurance to protect you and your family. If your health is something less than what the industry calls a “cleanskin”, forget a robot being able to help you.

No, so many of these issues involve relationships and something even more fundamental to our human makeup (patience).

Robo advisers won’t advise you that perhaps you would be best suited to a geared residential property investment for your portfolio, unless there’s a buck in it for them.

That will only happen if, God forbid, property agents and developers dab their toes in the robo advice sector. Please ASIC, make sure this doesn’t happen, as it will be a disaster.

Robo advice is currently, simply, just a cheaper way of flogging share portfolio services, managed funds and exchange traded funds (ie, run-of-the mill investment options) to the public, at a lower cost.

There’s no great over-arching strategy involved. And there’s unlikely to be for many years.

One of the greatest problems is that what initially attracts people to develop an interest in finance, after basic budgeting, is the promises of riches by investing, which is what robo advice will promise.

But, the law of averages says it won’t deliver any more or less often on that promise than any other form of investment.

Robo Advice is not the devil. But the current version, “Robo Advice Version 1.0”, has limited value and mostly to those who cannot afford proper, tailored, financial advice.

Why?

It’s really quite simple.

There’s a huge hurdle that technology needs to overcome first. And until they do, robots will be next to useless in providing long-term, valuable, financial advice.

Robots don’t do emotion. For mine, the best crack at it to date was the love-foreteller Dexter from Perfect Match in the 80s. And while Dexter wasn’t, actually, a robot, emotional intelligence in machines has not progressed much since Channel 10 axed Greg Evans. The first time. In 1986.

So much of the financial advice process is about understanding emotions and human frailties. The decision on what to invest in, when, and how much, will take some time for humans to teach computers to work out. Because humans struggle with it themselves!

How and why do you rank one goal over another? Which goal are you prepared to sacrifice to achieve another?

The choice of investments to achieve a particular outcome is one element of financial advice.

Understand this: Robo advice is just the current buzzword. A catchy, snappy phrase that demands attention and garners headlines.

Over time, it might turn in to something useful to more than those needing just the most basic of investment help.

But it can’t do much yet. Bring back Dexter.

Bruce Brammall is the author of Mortgages Made Easy and managing director of Bruce Brammall Financial. E: bruce@brucebrammallfinancial.com.au.