Robo advice suffers trust crisis

Robo advice suffers trust crisis

Investors are seemingly retreating from robo-advice, as a survey points to a lack of trust in automated investment.

A survey of 2,000 people by IW Capital, a firm which specialises in tax-efficient investments, found 38 per cent of investors do not or would not trust an automated investment programme to manage a proportion of their investable assets.

Many stated fluctuating economic events, such as Brexit, had prompted them to choose a human adviser over an online platform.

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Almost a quarter of those surveyed have investable assets, but are either waiting for or seeking financial advice from a person as opposed to an online wealth management platform, as they do not feel confident with automated processes looking after their money.

IW’s report, Investments in 2018: The Human Factor, suggested a personal relationship is important to investors.

“Having this personal relationship enables investors to discuss their portfolio, revise their investment strategy and assess their risk appetite as the markets react to Britain’s unfolding Brexit agenda,” a spokesman from IW said.

The study comes despite the proliferation of online wealth platforms such as Nutmeg, Moneyfarm and Wealthify, aimed at plugging the 'advice gap', where customer assets are not high enough to make advice cost effective.

Many of these platforms are aimed at the younger generation, but the IW study showed that 72 per cent of millennial investors need human advice to feel safe in investing.

The research has been compiled across a nationally representative survey of 2,004 respondents.

The figures also suggested 17 per cent of investors believe automated advisers are low risk and do not deliver returns, and 56 per cent say they need human interaction “to feel safe about an investment of any sort”.

Only nine per cent of respondents said thast they intend to use robo-advisors over the next five years.

Colin Low, wealth planner from Kingsfleet Wealth in Suffolk, said that he could see why investors were nervous of automated systems.

"Can robo-adviser systems empathise with a recent bereavement? Understand the nuance in risk profiling? Appreciate the emotion of a divorce? Explain the death benefit rules on pensions unique to the clients' circumstances or overcome natural human concern of market volatility with a personalised explanation?" he said.

Tony Byrne, managing director of Wealth & Tax Management in Milton Keynes, added: "I think millennials do want robo, but they would like a bit of the human touch too.

"It's like at the supermarket - I'd rather go to the till with someone on it, but I often use the self-checkout because the queue is too long. We can't ignore robe-advice - it is the way it is going."