Mr Fordree's company was the first in Australia to get its licence for a digital advice business – it obtained it three years – and it claims to be the biggest, with “over one million client journeys” under its belt.
Ignition Wealth is considering expanding in Ireland, but is staying away from the UK at present as it appears to be an overcrowded region with many other robo-advisers jostling for dominance.
He believes digital advice is the next step change in financial services, and will soon become accepted like many other technological developments.
Mr Fordree explained: “People don’t go to branches any more because it’s more efficient to do your banking in your own time. When ATMs first came in, people were quite distrustful of going to a machine in a wall to get at their cash.”
Now we hardly use cash at all, he added.
“We’re worrying over a step change about the way advice is delivered. Digital advice is going to enable people to do a lot of this stuff themselves – I’ll do it over a cup of coffee in my living room at 7pm.
“We don’t think digital advice is going to replace the human adviser. We’ve said the robo-adviser is going to do the heavy lifting around data, generating the risk profiling, and the human adviser is going to be more focused on adding value in more complex situations.
“Digital will bring down the initial cost of advice and make it much more accessible to more people.”
Ignition Wealth automates much of the initial data collection on attitude to risk, by collecting data from the adviser and client's bank account on the individual’s income and lifestyle, and recommending the type of portfolio they should invest in.
Mr Fordree said the algorithm adopts a very ‘conservative’ approach, and it is clear, for example, that if someone only has a 12-month time horizon and a cautious approach, then they would not be put into an emerging markets fund. This can be overridden, though, for example if someone has a A$10m (£6m) inheritance they've not told the system.
He said: “I’m not aware of one complaint at all – the system is designed to be very clear in what the advice has been about.”
Educating the client in the basics of investment principles has been an important feature of the website, especially the relationship between risk and return. But, ultimately, digital advice can massively bring down the cost of advice because of the automation of the initial data-gathering process.
“We see the asset allocation and portfolio construction reducing in cost dramatically because we’ve got Vanguard and BlackRock giving it away almost for free,” Mr Fordree said.
Ignition Wealth started out by offering a technology service to pension funds 10 years ago, but realised that it was easy to adapt its technology for the retail finance sector because it could open up the advice process to many more people.
Mr Fordree said: “In Australia, they were turning away six or seven people a week with A$200,000 of investment. Advisers weren’t allowed to talk to anyone with less than half a million.”
The typical advice process starts at A$5,000, In Australia, which means that only around 15 per cent of the adult population receives financial advice. The cost of Ignition Wealth's digital advice service is a fifth of that, which makes advice available to around a further 15 per cent of the population.
A big driver of digital advice is the increasing popularity of passive investing. Ignition Wealth’s current offering directs clients to different ranges of exhange-traded funds. Under Ignition's own licence, a new iteration of the software will direct people to active funds, or if it is under the adviser's own licence, then it can be plugged into his portfolio options.
Mr Fordree noted: “The big driver globally is that more than 50 per cent of active funds in Australia are underperforming passive funds, so the hot money is going towards digital advice and passive funds. We’re seeing a very strong trend towards low cost.”
This is why Vanguard and BlackRock have made such a strong foray into the digital advice sector, he explained, because low-cost passives and automated advice go hand-in-hand.
Ignition offers a B2B service exclusively, dealing with ‘licenced’ financial advisers in Australia and ‘unlicenced’ professionals, such as accountants, who want to be able to offer some kind of add-on service to their clients. Business customers of Ignition white-label the service and are charged a wholesale price by the company.
Ignition is majority-owned by the staff and management, and it would be safe to assume that it would be on the radar of the likes of BlackRock, which has made many aggressive forays into the automated advice sector.
He said: “Our view is that if you look forward three to five years, every advice journey will have a robo component. Every advice business is going to have to build this kind of partnership.”
Melanie Tringham is features editor of Financial Adviser
Mark Fordree's career ladder
2014 to present Chief executive, Ignition Wealth
2007 – present Director, Nunyara Rural Holdings
2009 – 2010 Managing director, Fermiscan Holdings Ltd
2000 – 2008 Founder and chief executive of EG Capital
1995 – 1998 Executive director, ANZ Securities
1993 – 1995 Executive director, ABN Amro
