Robo-advice is less popular than financial advisers, friends or even the internet, according to research published today (31 May).
Despite an increased focus on using computer programmes and automation in financial decision-making, most consumers do not feel comfortable with this new technology.
According to the fifth annual ING International Survey Mobile Banking 2017, which quizzed nearly 15,000 people across 15 countries, nine in 10 (91 per cent) of people in Europe would not let a robo-adviser – a computer program that learns consumer preferences and invests money based on this information –manage and make decisions about their finances unilaterally.
Allowing a computer program to make decisions is not out of the question for some people, with a quarter (26 per cent) saying this would be an option if they got final approval. However, only 3 per cent are willing to give up control and let a robo-adviser act on their behalf without them first giving the go-ahead.
Behavioural science suggests that people are typically reluctant to give up control – or perceived control – over decisions, even if outsourcing the decision will lead to a better outcome, so this could explain why so few people would be willing to hand their decisions over to a computer program.
At the same time, people feel more comfortable if robo-advisers simply advise rather than make decisions on their behalf. Three in 10 (29 per cent) would not be willing to allow decision-making but would accept advice from a computer program, although they would still often prefer advice from other sources.
When seeking investment advice, people still prefer the human touch, with two in five (40 per cent) saying they would seek out a human financial adviser if looking to invest, while 14 per cent would speak to friends and family.
Alternatively, people are willing to find the information they seek themselves via the internet and specialist websites (16 per cent), but again, few are willing to trust a robo-adviser.
Many people in Europe are wary of allowing computers to make decisions on their behalf, and people become less comfortable when there are large sums of money at stake.
People in Europe feel relatively comfortable letting a computer automatically send a birthday card to a friend (38 per cent), transferring money from savings (34 per cent) or ordering milk from the grocery store (32 per cent), but would feel much less comfortable allowing it to apply for new health insurance (21 per cent) or put money into investments (13 per cent).
Women and over-65s are the most likely to feel uncomfortable about allowing a computer program to make decisions on their behalf, possibly due to risk aversion or distrust of newer technologies.
Women were 15 per cent more likely than men to say they do not want automated financial activities at all, while nearly half (48 per cent) of over-65s said the same.
ING behavioural scientist Nathalie Spencer commented: “Letting algorithms make money decisions for us has the potential to be really advantageous and free up some headspace – yet we found that many people are reluctant to give up control of these decisions.
“As newer technologies like robo-advisers become more prevalent, we may see people start to embrace the personalisation and convenience it offers, but the desire to control decisions will most likely mean that most will always want final approval.
“Given that often computer programs can outperform humans, it is important that as an industry we learn more about where confidence in this type of tech breaks down. This will be key in trying to help improve people’s financial positions.”
But Jonathan Watts-Lay, director of Wealth at work, a provider of financial education, guidance and advice in the workplace, said robo advice is often really just a sophisticated self-selection tool, and nothing to fear.
"Individuals complete a detailed questionnaire and based on the answers given, the tool recommends investments or products for that individual. It is available to investors now, but isn’t widely available at-retirement yet, but may be soon.
“Robo advice means different things to different people, which is part of the reason why there is a lot of confusion in this area. Most people believe that there is no human interaction during the process, however some providers do support robo advice with human contact in the form of telephone and/or online support.
"Sometimes these are financial advisers, and sometimes just customer support helping customers through the process. In my experience, few people are going to be willing to hand over their hard earned pension to a robot to manage.
"I believe many people prefer to deal with financial matters face to face, particularly when nearing retirement as the decisions are so much more complex and the implications of getting a decision wrong are so much bigger.”
He concluded: "Many individuals struggle to distinguish between advice, in which a specific product or strategy may be recommended by a regulated adviser, and guidance, which will provide an explanation of types of product or strategies but not a specific recommendation. It is important to realise that not all robo advice is ‘regulated advice’, so that individuals are aware that not all decisions will come with the same consumer protection as regulated advice."
