Robo advice uses an algorithm based on machine learning or artificial intelligence and requires you to provide information such as your age, gender, financial goals, risk tolerance, income and assets on a digital advice website. Assumptions are made using this information, which will generate financial advice the program determines is most suited to you.
Robo advice usually focuses on a single (advice) issue only, such as recommending suitable investment options. After answering the questions and providing the required information about your financial and personal circumstances, the algorithm takes all this into account before making recommendations and producing a statement of advice (SOA) where personal advice is given and financial products are recommended.
Robo advisers can also be used to obtain general advice, though this will not be tailored to your specific needs, as you will not be asked to provide detailed information about your personal and financial situation. This advice will not lead to the generation of an SOA and you will need to consider whether it is appropriate for you before actioning the general advice.
Your circumstances can change over time, so it's a good idea to check at least every 12 months or more frequently if need be, that the advice still fits your needs.
Robo advice generally attracts lower fees, as human advisers don't assess your situation and needs. It may appeal to those who:
Robo advice in practice
Superannuation funds might use digital platforms providing automated services regarding optimal superannuation contributions or suitable investment options. However, this advice will usually require you to make recommended changes online or by calling your fund.
Note: Robo advice firms that offer advice on financial products still need to have an AFS licensee or be an authorised representative of an AFS licensee, as per a human financial adviser.
|General versus personal financial advice|
|What is a financial adviser?|