Rise of the Money Robots: Kiwis attitudes to robo-advice. New Zealand Robo-Advice Report

Transcription

1 Rise of the Money Robots: Kiwis attitudes to robo-advice New Zealand Robo-Advice Report NOVEMBER 2016

2 TABLE OF CONTENTS KEY INSIGHTS 2 INTRODUCTION 3 SURVEY FINDINGS 4 ENGAGEMENT WITH RETIREMENT FINANCES 4 REASONS FOR NOT CHECKING OR CHANGING 6 CONFIDENCE TO USE ROBO-ADVICE 7 USE OF A FINANCIAL ADVISER 8 USING A ROBO-ADVISER 9 HOW A ROBO-ADVISER WOULD BE USED 10 PREFERENCE FOR USING A HUMAN FINANCIAL ADVISER 11 APPENDIX 1: DEMOGRAPHICS 12 Kiwi Wealth Limited is the Issuer and Manager of the Kiwi Wealth KiwiSaver Scheme (the Scheme) and is a related company of Kiwibank Limited. Kiwibank is a distributor but is not an issuer of the Scheme. Investments made in the Scheme do not represent bank deposits or other liabilities of Kiwibank and neither they nor any other person guarantees the repayment of members interests in the Scheme or the payment of any earnings or returns on investment in the Scheme. Investments in the Scheme are subject to investment and other risks, including possible delays in payment of withdrawal amounts in some circumstances and loss of investment value. If you require personalised financial advice to help you select an investment portfolio (which takes into account your own financial situation or particular goals) we recommend you contact an authorised financial adviser. 1

3 KEY INSIGHTS Less than of Kiwis currently have a financial adviser Only of people have checked on their retirement finances in the past 12 months Kiwis don t check on their retirement investments more often due to a lack of knowledge (26%), not having time (22%) or feeling that retirement is too far away Young Kiwis see robo-advice as an opportunity to get advice on setting financial goals; older Kiwis see robo-advice as a way of helping them to realise those goals Access to human financial advisers is more important the older one gets, with older generations more hesitant to entrust robo-advisers to manage their retirement savings Robo-advice should complement human financial advisers 2

4 INTRODUCTION This Kiwi Wealth report assesses New Zealanders attitudes to a new technology disrupting the financial services sector globally: robo-advice. The report examines people s willingness to use a robo-adviser for managing their retirement investments and the circumstances from which they would use one. In the past five years the number of robo-advisers around the globe has multiplied. According to KPMG, by the end of 2015 robo-advisers were estimated to be managing US$50-60 billion worth of investments. By 2020, AT Kearney expects this to grow to $2.2 trillion. In contrast, New Zealand s financial services sector has been slow to embrace many of these innovations, largely due to restrictions imposed by current legislation. New Zealanders pride themselves as early adopters of technology but finance remains one of the last sectors requiring total human intervention. This report shows that many New Zealanders, particularly in the age group, would use a robo-adviser to set retirement goals, determine risk profile and get recommendations to achieve those goals. Some human intervention is preferred for professional opinions on long-term financial outlook, especially when there is a significant change in financial or personal circumstances. Additionally, the report shows that people are, rightly, cautious with their money. They want a proven track record and a strong financial services reputation backing a robo-advice product before they will be willing to use it. Our assessment is New Zealand is nearing a tipping point in delivery and accessibility of financial advice. 80% of New Zealanders are not using a financial adviser for managing their retirement finances and there are only 1,800 authorised financial advisers available to serve 2.6 million KiwiSaver members. Widespread take up of robo-advice will unlock good, low cost financial advice to more New Zealanders than ever before. It democratises wealth creation as people get more engaged with their finances and make informed decisions. A concerted effort from financial services providers is the only way to make robo-advice a core instrument in financial services. Without it, we risk falling further behind the world in wealth creation. Kiwi Wealth s digital retirement income planning tool uses a range of calculations and algorithms to allow its KiwiSaver members to estimate the future worth of their KiwiSaver investment, based on their current circumstances. The tool uses the member s current balance, contribution rates, projected returns and other economic factors to estimate retirement income. These estimated future values be viewed and updated at any time, while members can also make changes to their investment direction, allowing them to take more direct control over their KiwiSaver investment. As more features are added in the coming years, our ambition is that every New Zealander will be able to access quality advice on their retirement finances. Joe Bishop Head of Retail Wealth and Marketing 3

5 SURVEY FINDINGS Emerging technologies will make it easier for investors to get access to the advice and information they need to make good informed investment decisions. Robo-advisers automate the provision of advice, either complementing or replacing a human adviser. In October 2016 Kiwi Wealth commissioned Perceptive Research to look into Kiwis attitudes toward the use of robo-advice to automate the management of investment and retirement savings. The company surveyed 1001 New Zealanders on a number of factors relating to their level of engagement with their finances, if and how they used financial advisers, and the areas where Kiwis would have confidence in obtaining advice from a robo-adviser. This report presents findings from that survey. ENGAGEMENT WITH RETIREMENT FINANCES Making decisions about investments, and planning for retirement, starts with checking and making decisions about one s retirement investments (excluding KiwiSaver). The survey found that a fifth of respondents () indicated they haven t checked their retirement finances in the past 12 months. A third of respondents do not have any other retirement finances other than their KiwiSaver investments (). Women (at 40%) were noticeably higher than men (at 28%) when it came to not having retirement finances. FREQUENCY OF ENGAGEMENT WITH RETIREMENT FINANCES (by gender) 40% 28% 23% 12% 12% 14% 21% MONTHLY EVERY 6 MONTHS ANNUALLY HAVEN T CHECKED IN THE PAST 12 MONTHS I DON T HAVE ANY RETIREMENT FINANCES OTHER THAN KIWISAVER Total Male Female 4

6 Why don t people check their retirement savings more frequently? Several factors were identified, including a lack of time, lack of knowledge and lack of expertise. For many particularly younger respondents, retirement was considered too far away. But as age increases, so too does the frequency in which respondents are checking or changing factors, for instance 30% of those aged 65+ do so monthly. Higher proportions of those in the younger age groups have no other retirement savings outside of KiwiSaver (62% aged years). FREQUENCY OF ENGAGEMENT WITH RETIREMENT FINANCES (by age) 62% 43% 42% 30% 28% 29% 27% 15% 14% 14% 14%14% 23% 19% 5% 4% 7% 8% MONTHLY EVERY 6 MONTHS ANNUALLY HAVEN T CHECKED IN THE PAST 12 MONTHS I DON T HAVE ANY RETIREMENT FINANCES OTHER THAN KIWISAVER Total years years years years years 65+ years Total years years years years years 65 + years 5

7 REASONS FOR NOT CHECKING OR CHANGING While the level of engagement is one factor, the reasons for a lack of engagement also play an important role. A quarter of all respondents do not check their retirement investments more frequently due to a lack of knowledge (26%), with similar proportions indicating they don t have time (22%) or retirement is too far away (21%). There were important differences in these findings based on age: More year olds felt they lacked the knowledge (44%) compared to 65+ year olds (14%). Younger respondents - those aged between and also believed retirement was too far away, citing this as a reason not to engage now. REASONS FOR LACK OF ENGAGEMENT WITH RETIREMENT SAVINGS (by age) LACK OF KNOWLEDGE 14% 26% 32% 27% 32% 29% 44% LACK OF TIME 6% 7% 22% 24% 32% RETIREMENT IS TOO FAR AWAY 7% 1% 15% 21% 50% 51% LACK OF ACCESS TO EXPERTISE 7% 23% 24% 30% OTHER 3% 11% 27% 28% 58% UNSURE 6% 19% Total years years years years years 65+ years 6

8 CONFIDENCE TO USE ROBO-ADVICE What are the fees? Robo-advice is a new concept for most New Zealanders, although once they understood the value of the proposition there were many factors which would give them confidence in using such a service. Overall, the track record of the robo-advice service (46%) and the ease of using the software (41%) are the top factors that would give respondents confidence to use this kind of service. Both these factors were consistently high across all age groups. For younger respondents (18-24 years), the brand name and reputation of the provider offering the service was considered of near-equal importance (48%) to the track record of the robo-advice service (51%) and the ease of use of the software (49%). WHAT WOULD GIVE YOU CONFIDENCE TO USE ROBO-ADVICE? (by age) TRACK RECORD OF THE ROBO-ADVICE SERVICE 46% 46% 45% 49% 51% 56% EASE OF USE OF THE SOFTWARE 28% 41% 42% 40% 46% 47% 49% REFERENCES OR CASE STUDIES FROM OTHER CLIENTS USING THE SERVICE 30% 36% 36% 36% 41% 43% BRAND NAME AND REPUTATION OF THE PROVIDER OFFERING THE SERVICE 7% 36% 38% 43% 48% 43% 5% OTHER 4% 3% 4% 7% 10% UNSURE 23% 32% 40% 48% Total years years years years years 65+ years 7

9 USE OF A FINANCIAL ADVISER Financial advisers play an important role in giving New Zealanders information and advice on how to manage their retirement investments. Across the group, 19% of respondents have a professional financial adviser managing their retirement finances or KiwiSaver. As age increases up to retirement age, the proportion of respondents with financial advisers also increases, presumably because the amount of funds available to invest are larger, and the timeframes relating to retirement investment are closer to being realised. USE OF A FINANCIAL ADVISER (by gender and age) TOTAL 19% MALE 23% FEMALE YEARS 6% YEARS YEARS YEARS 21% YEARS 27% 65+ YEARS 22% Yes 8

10 USING A ROBO-ADVISER Would you consider using a robo-adviser? Despite this being an emerging area, one in five would be likely to consider using a robo-adviser to manage their retirement finances. Some differences can be seen with gender and age those more likely to consider this are males (), and those aged between years. As age increases, then respondents are increasingly unlikely to use a robo-adviser. This could be because of familiarity with technology, because robo-advice is an emerging area that s currently unproven in this country, and/or there s an existing relationship with a (human) financial adviser. Interestingly, slightly more who currently use a financial adviser would consider a robo-adviser (24%) compared to those who do not use one (). WOULD YOU CONSIDER USING A ROBO-ADVISER? (by gender and age) TOTAL 37% 21% MALE 33% FEMALE 40% YEARS 42% 15% YEARS 24% 30% YEARS YEARS YEARS 39% 65+ YEARS 51% 15% CURRENTLY USE A FINANCIAL ADVISER DO NOT USE A FINANCIAL ADVISER 41% 24% Unlikely Likely 9

11 HOW A ROBO-ADVISER WOULD BE USED What are the fees? Robo-advisers have features that resonate with different age groups. Overall, the main uses of a robo-adviser would be to provide recommendations on achieving goals (41%) and helping to determine risk profile (38%), this was particularly so for respondents aged from 25 to 54. For those aged 18-24, they would be more interested in setting retirement goals (47%), reporting on how they are doing with these (47%) and optimising tax (38%). HOW MIGHT YOU USE A ROBO-ADVISER? (by gender and age) PROVIDE RECOMMENDATIONS ON HOW TO ACHIEVE MY GOALS HELP DETERMINE MY RISK PROFILE AND/OR ASSET ALLOCATION REPORT ON HOW WELL I AM DOING AGAINST MY GOALS OPTIMISE MY TAX 19% 24% 29% 33% 33% 33% 30% 38% 41% 41% 42% 42% 38% 38% 41% 36% 38% 39% 44% 45% 46% 47% 49% HELP SET UP MY RETIREMENT GOALS BRING ALL OF MY RETIREMENT ASSETS TOGETHER 1% 8% 10% 19% 23% 22% 29% 38% 37% 47% OTHER 1% 1% 1% 2% UNSURE/I WOULDN T USE ROBO-ADVISER 29% 26% 29% 29% 41% 54% Total years years years years years 65+ years 10

12 PREFERENCE FOR USING A HUMAN FINANCIAL ADVISER What are the fees? Robo-advisers don t have and perhaps don t need to have all the answers. Many people have a preference to use a human financial adviser instead. When would they prefer to use a human adviser? When they want to obtain a professional s opinions and views (48%), particularly for those aged years (58%). Respondents would also prefer to talk to a human when there is a change of financial or personal circumstances (43%), particularly mentioned by those aged years. As retirement gets closer, there appears to be a natural tendency to talk to a person about these matters as the stakes could be higher. WHEN WOULD YOU PREFER USING A HUMAN FINANCIAL ADVISER OVER A ROBO-ADVISER? (by age) TO FIND OUT A PROFESSIONAL ADVISER S OPINIONS AND VIEWS 48% 50% 46% 49% 49% 43% 58% WHEN THERE IS A CHANGE OF FINANCIAL AND/OR PERSONAL CIRCUMSTANCES 39% 37% 40% 43% 46% 48% 49% TO CONFIRM THE RECOMMENDATION FROM THE ROBO-ADVICE SOFTWARE 24% 28% 32% 32% 36% 38% WHEN MY ASSESTS REACH A CERTAIN DOLLAR AMOUNT 8% 19% 21% OTHER 4% 0% 2% 3% 3% 6% 8% UNSURE/NONE OF THESE 26% 21% 26% Total years years years years years 65+ years 11

13 APPENDIX 1: DEMOGRAPHICS GENDER BREAKDOWN AGE BREAKDOWN MALE FEMALE 48% 52% 22% 10% 19% years years 15% years years years 65+ years REGIONAL BREAKDOWN 30% 15% 10% 5% 0% NORTHLAND AUCKLAND WAIKATO BAY OF PLENTY GISBORNE HAWKES BAY TARANAKI MANAWATU-WANGANUI WELLINGTON OTHER NORTH ISLAND WEST COAST CANTERBURY OTAGO SOUTHLAND TASMAN/NELSON/MARLBOROUGH 12

14 APPENDIX 1: DEMOGRAPHICS CONT HOUSEHOLD PROFILE Single person living alone Single person sharing with friends 9% Couple with no children Single/Couple with preschool-aged children 7% Single/Couple with school-aged children Single/Couple with adult children Single/Couple with children who have left home Single/Couple with mix of preschool/school/adult children 5% Other (please specify) 2% HOUSEHOLD INCOME EMPLOYMENT STATUS Up to $30,000 $30,001 - $50,000 6% 2% 3% Employed full time $50,001 - $70,000 14% $70,001 - $100,000 39% Employed part time Business owner / Self-employed $100,001 - $130,000 11% Over $130,000 11% Would rather not say 8% 10% 15% Housewife / husband Retired Student Unemployed Other 13

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