Bank Customers don’t trust in robo-advisor for their money

Robo-advice is less popular than financial advisers, friends or even the internet, according to research published today on 31 May.

Despite an increased focus on using computer programmes and automation in financial decision-making,  most consumers do not feel comfortable with this new technology.

According to the fifth annual ING International Survey Mobile Banking 2017, which quizzed nearly 15,000 people across 15 countries, nine in 10 (91 per cent) of people in Europe would not let a robo-adviser – a computer program that learns consumer preferences and invests money based on this information –manage and make decisions about their finances unilaterally.

In explaining why the take up is not higher, the study suggests people are reluctant to give up control – or perceived control – over decisions. This is the case even if outsourcing the decision will lead to a better outcome.

ING noted that especially in Europe people are wary of allowing computers to make decisions on their behalf. They tend to become less comfortable when there are large sums of money at stake.

The report found Europeans are not total technophobes though. For instance they feel relatively comfortable letting a computer automatically send a birthday card to a friend (38%), transferring money from savings (34%) or ordering milk from the grocery store (32%). They tend to be far less relaxed when technology is applied to buying health insurance (21%), or putting money into investments (13%).

ING behavioural scientist Nathalie Spencer said: "Letting algorithms make money decisions for us has the potential to be really advantageous and free up some headspace – yet we found that many people are reluctant to give up control of these decisions.

"As newer technologies like robo-advisers become more prevalent, we may see people start to embrace the personalisation and convenience it offers, but the desire to control decisions will most likely mean that most will always want final approval."

She added: "Given that often computer programs can outperform humans, it is important that as an industry we learn more about where confidence in this type of tech breaks down. This will be key in trying to help improve people’s financial positions."  

The robo-advice market was originally developed by startups such as Wealthfront and Betterment with ambitions of upending the traditional financial advice sector by offering automated investment advice to clients through web-based platforms.

Robo-advisers currently account for a small piece of the wealth management industry, overseeing roughly $200 billion of client assets in 2016, according to consulting firm A.T. Kearney.
That figure will however balloon to $2.2 trillion by 2020, the consultancy firm said, amid changing regulations that favour the new industry and cost pressures on traditional advice.