Automated investments services – commonly called ‘Roboadvice’ are a hot topic at the moment. Even ASIC is getting in on the act with the release of a consultation paper and a draft Regulatory Guide on regulating digital financial product advice.
“ASIC is keen to see a healthy and vibrant digital advice sector,” ASIC Commissioner John Price said at the time of the paper’s release in March.
“We see digital advice as having the potential to offer Australian consumers access to good quality, low cost, financial advice.”
Many others also see this potential, with Yellow Brick Road, NAB and Macquarie among the larger players to recently release their own roboadvice models. A number of startups are also developing and releasing various forms of automated investment service; one such start up is QuietGrowth, which uses a sophisticated algorithm to determine the risk tolerance of clients and determine the optimal asset class combination for each client. Investments made are via eight specific low cost passive ETF investments.
Canstar spoke with QuietGrowth CEO, Dilip Sankarreddy, about the value proposition of the model.
Q: What is the benefit for self-directed investors in using QuietGrowth?
A: A self-directed investor can save time and money by using QuietGrowth.
We offer better quality portfolios and better user experience at a lower cost compared to the competition. We are able to better serve the long-term investment management needs of our clients compared to a similar service provided by a traditional adviser. Our lower fees, highly diversified portfolios that are designed by experts, advanced client risk evaluation algorithms, and superior online engagement ensure that our service is more beneficial to the consumers.
So, even if a self-directed investor has the skills to cater to her own investment management needs, opting for QuietGrowth can save her time that she can better use for her work, family or hobbies.
Moreover, our fees include the trading costs. So, untill a certain portfolio size, it is actually less expensive for a self-directed investor to opt for QuietGrowth instead of placing the same trades by herself.
Q: A number of institutions are rolling out their versions of roboadvice at the moment. What is Quietgrowth’s competitive advantage?
A: Our competitive advantage is our passionate team that is skilled both in finance and technology. This enables us to roll out features that are very useful for the customer at a lower cost and shorter period. Since we launched in 2015, we have augmented our service by introducing a mobile app for our clients. We will continue to roll out advanced features.
In the coming years, the industry will become very advanced technologically. For example, artificial intelligence will be applied to investment management service. We at QuietGrowth understand technology better, and hence are better placed to provide a superior service in the coming years.
Certain big asset management firms might outsource these advanced requirements to specialized service providers, but will incur a much higher cost while doing so, making their business not-so-viable.
Q: You noted in a recent article that robo-advice firms are finding it difficult to generate a profit. Ultimately how many Roboadvice firms is there room for in Australia?
A: Yes, automated investment management firms should be prepared for the long haul to generate profits. It is being discussed that an automated investment firm in the US should have at least $20 to $30 billion US dollars under management to become profitable. So, in Australia, only those firms that get to a considerable scale will have a viable business in the long run.
There is definitely room for one independent firm that offers superlative service at a low cost in Australia. We have to see if there is room for more than one independent firm in Australia. In coming years, many existing asset management companies and banks will roll out their own versions of automated investment management service. However, they will have their own inherent constraints in providing the best service to the customer. Hence, there will be a need for at least one independent firm too.