by David Chaplin
Macquarie Bank has lent its big brand to the robo-advice revolution. And, from all accounts, the Macquarie offering is not just a calculator which prompts investors into a range of ETFs. As difficult as it may seem to believe, this may be the real deal for independently minded investors.
The new online service, ‘OwnersAdvisory’, is an investment advice system to be available from next month, featuring access to 30,000 underlying products and a flat fee-for-advice structure.
A Macquarie spokesperson said OwnersAdvisory would only be open to Australian residents for the time-being. However, the system could “potentially” be rolled out in other jurisdictions.
John O’Connell, Macquarie Wealth Management chief investment officer, is reported to have said OwnersAdvisory would offer a product-agnostic, personal investment advice service with a flat fee “retail price point”.
After completing an online risk-profile, OwnersAdvisory would suggest a portfolio for clients – although the system wouldn’t take into account factors such as age, tax position or debt. The risk profile was developed by Paul Resnik, who has been hammering away with his risk assessment business for years.
“[OwnersAdvisory] will tell you what actual things to buy, what things to sell, your portfolio tilts and where we think they should be given our views on the outlook for markets, and for economies,” O’Connell said.
The OwnersAdvisory system would be open to all investors, who would have discretion on how to implement the advice. “They can take that advice and trade on their CommSec account, their Macquarie online trading account … or whoever else they want.”
Macquarie’s robo-investment solution follows the decision o National Australia Bank (NAB), this September to launch an auto-advice service. However, NAB’s ‘Prosper’ platform would initially be offered only to the bank’s 40,000 online customers.
For Macquarie, as with any of the four main-street banks, to develop a genuine open-architecture advice system, will be a challenge to sell to consumers. None of the banks has a reputation for honest advice to investors, to put it kindly. However, unlike other robo-advice offerings, OwnersAdvisory will not push investors into any particular investment products.
Earlier this year the Australian Securities and Investments Commission (ASIC) – set up a “Robo-advice Taskforce” (RAT) to investigate the potential impact of the new advisory technology.
In a November 5 speech, ASIC chief, Greg Medcraft, said the regulator was “very supportive of the automated provision of advice”.
“We see it has the potential to offer a convenient, low-cost advice service to consumers,” Medcraft said. “We also see benefits such as improved compliance and record keeping; and the potential to reduce conflicts of interest.”
However, he said ASIC also wanted to “better understand robo-advice business models” with the RAT currently digging into issues including:
> how robo-advice providers comply with the best interests duty
> how robo-advice providers develop and test their algorithms;
> the training and competency requirements for those sitting behind robo-advice models; and,
> the adequacy of a robo-advice operator’s compensation arrangements.
*David Chaplin is the editor of Investment News NZ. Greg Bright contributed.