Investing in the digital age: Technology and Robo-advice

Technology has played a huge role in disrupting many industries, transforming the products and services available to consumers and the […]


Technology has played a huge role in disrupting many industries, transforming the products and services available to consumers and the way they access them.

The music industry has gone through many stages of disruption over the years through Napster, iTunes and Spotify, while the travel industry has seen changes in the way people research and book their holiday through the rise TripAdvisor, Expedia, Zuji, Webjet and more recently Airbnb.

Digital disruption has also impacted the financial sector with the growth of many Financial Technology (FinTech) companies around the world.

Financial services and technology

Recent changes to the financial services industry have been driven by both consumer demand and technology innovations:1

  • Consumers are more willing to consider non-traditional alternatives to ‘traditional’ loans, savings, investments and retirement products.
  • There is a growing lack of trust towards traditional financial service providers following the Global Financial Crisis (GFC) and financial advice scandals such as the Commonwealth Financial Planning scandal.2
  • Consumers are increasingly time poor and are looking for time saving solutions where they’re able to self-service at a time that’s convenient to them.
  • Customers are increasingly value driven.
  • Innovation is enabling the cost of financial services to be drastically reduced through the adoption of cloud solutions. This is also opening up access to financial services to more people.
  • Technology is giving consumers greater transparency when selecting a financial services provider.
  • Growth in the willingness in adoption of new products, innovations and technologies.

The FinTech sector has been experiencing massive growth around the world, initially in the US with Europe and Asia-Pacific starting to catch-up in recent years. Financing activity reached US$3 billion in 2013 and is predicted to grow to US$6-8 billion by 2018.3


In Australia, the technology start-up sector across all industries has the potential to contribute A$109 billion or 4% of GDP to the economy and 540,000 jobs by 2033.4 FinTech start-ups are also starting to be recognised on the world stage, with Stockspot and 3 other Australian FinTech companies making the top 50 Global FinTech innovators.5

A key advantage that FinTech companies have is that they have been able to start from scratch in the age of cloud, big data and mobile, therefore avoiding expensive overheads like legacy IT systems, branch networks and staff costs usually incurred by the larger financial institutions. This means that they’re able to pass on the savings to their customers as well as being able to offer more innovative products and services.

The recent Murray Financial System Inquiry also confirmed that technology has the potential to reduce costs for consumers, decrease risk and improve access to financial products. The report encourages government and regulators to further enable the benefits of innovation to flow through the financial ­system while managing relevant risks.

The rise of robo-advice

Innovation in the financial sector has enabled the growth of automated investment services, otherwise known as robo-advice, like Stockspot. Robo-advice makes use of sophisticated algorithms to help consumers build and manage an investment portfolio based on their age, risk aversion, income requirements, investment timeframe, income, savings and assets.

The objective of robo-advice is to make professional investment advice and portfolio management more accessible to those who would normally not have enough money to warrant seeing a financial adviser or justify paying for one. Robo-advice also enables more established clients to reduce the cost of advice, administration and investment management, and improves transparency around service levels and fees.

One of the key advantages is that consumers are now able to access a well-diversified portfolio to help reduce the risk of having all their eggs in one basket with a low minimum investment amount. For instance, the Stockspot portfolios contain over 1,400 stocks and bonds from around the world.6

Robo-advisors provide:

  • Personalised portfolio allocation
  • Tax aware portfolio design
  • Smart rebalancing to maintain a target risk level
  • 24/7 access and control
  • Low fees

Robo-advisors typically invest their clients money in exchange traded funds (ETFs) to help keep fees low, and any fees charged are simple and transparent. This contrasts to traditional managed funds or advised investments where it can be unclear exactly how much fees they end up charging.

For example, an actively managed fund can charge a management fee of 1% per year, with money usually invested via a platform which can charge another 1% in fees. Add on the fee charged by a financial adviser, and an investor may end up paying 3% or more per year.

The majority of actively managed funds also underperformed the market over the long term after fees are accounted for.7

Robo-advice products have become popular overseas, with Wealthfront and Betterment leading the way in the US and Nutmeg in the UK. Wealthfront recently became the first digital wealth manager to reach US$1 billion in assets under management. Wealthfront reached that milestone in a fraction of the time it took for the fund managers to accumulate US$1 billion 10 or 20 years ago. The growth path of Wealthfront so far has more closely resembled Facebook or Instagram rather than a financial service provider which suggests that robo-advice as a business model is here to stay and likely to continue disrupting traditional players.


Stockspot brought this service to Australia last year and we have seen strong interest in our product since launch.

How robo-advisors works

Robo-advisors like Stockspot enable investors the ability to build a diversified investment portfolio online, which is monitored and rebalanced automatically on a personalised basis. Here is how Stockspot works:

  1. Build an investment profile: Register and build your investment profile by answering a series of questions relating to your current financial situation, investment goals, timeframe and risk appetite.
  2. Select a portfolio: Our online engine will match up with a portfolio based on your investment profile.   You can then review or adjust the portfolio before proceeding to invest.
  3. Complete application: Apply online by filling out the application form and providing your details for ID verification as required by law.   If applying as an individual or joint account, you’ll need to provide identification documents like driver’s license, passport, medicare card or utilities bill.  For trusts and self-managed super funds (SMSFs), you’ll also need to provide your trust deed and if the trust is a company structure, the company extract containing directors’ names.
  4. Set-up cash management account: Once your application is approved, a Macquarie Bank cash management account (CMA) will be set-up under your name.   This account is specific to your Stockspot portfolio for auditing purposes and will be used to facilitate the investment process as well as receive dividends and pay fees. We have partnered with Macquarie as they provide a fully online application process and do not charge account keeping fees.
  5. Start investing: Add to your portfolio by depositing money into your CMA via Electronic Funds Transfer (EFT) from your bank or BPay.   Once the money is in the account, we will invest it into the relevant ETFs as part of your portfolio.   All investments are held in your name and you can add to your portfolio at any time by making additional deposits or setting up a scheduled periodic transfer.
  6. Viewing your portfolio: You can track your portfolio online, as well as access statements and reports for tax time.
  7. Monitor and rebalance: We will monitor and rebalance your portfolio on an ongoing basis.  Let us know when your investment profile changes and we will adjust your portfolio accordingly.


Low fee, hassle-free investing

Stockspot is Australia’s fastest growing automated investment service. We can help you build and manage a personalised portfolio tailored to your financial situation and your goals. With Stockspot, there’s no paperwork, no need to be an expert and no hassles.

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Related posts

1 KPMG and The Committee for Sydney ‘Unlocking the potential: The Fintech opportunity for Sydney’ October 2014
2 Planners go rouge (Sydney Morning Herald)
3 Accenture and CB Insights report ‘The Boom in Global Fintech Investment’ 2014
4 Google Ventures and PwC ‘The start-up economy – How to support tech start-ups and accelerate Australian innovation’ April 2013
5 KPMG, AWI Ventures, FSC ‘50 Best Fintech Innovators Report’ 2014
6 Stockspot portfolios: what stocks and bonds are they invested in? – January 2014
7 Stockspot Fat Cat Funds Report 2014

Founder and CEO

Chris has been vocal in calling out the industry 'Fat Cats' and is known for telling it as it is. He sits on two Advisory Committees for the industry regulator ASIC, and was previously a fund manager at UBS. He holds a Bachelor of Commerce (Accounting/Finance Co-op Scholarship) from UNSW.

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