CFA Survey Finds Stubborn Pockets of Robo-Resistance

A large poll of chartered financial analysts (CFAs) conducted internally by the CFA Institute found widely varying opinions of the state of the robo-advice industry—with a sizable plurality of charter holders suggesting they have little interest in the new wave of fin-tech.

Just 19% of those polled said they were “very familiar” with the so called robo-advice tools and services currently out there on the market, and “a not insignificant 16% of CFA members are not at all familiar with such tools.”

The findings come from a new report published by the CFA Institute, which it put together at the request of European banking and market authorities interested in learning about the state of robo-advice globally. Explaining the results of its global member survey, the CFA Institute says the North America region clearly has the highest level of familiarity when it comes to integrating data and automation technology into portfolio management and financial planning. Interestingly, developed European markets actually lag behind some emerging markets in terms of charter holders’ awareness of and openness towards robo-advisers.

Looking across all its responses, CFA Institute finds asset management (54%) is considered to be the sector that will be most affected by automated financial advice tools, followed by banking (16%), securities (12%), and insurance (8%). According to the survey report, many of the open-ended responses put forward under “other” noted financial advisers and wealth management as being the specific group that will be most affected.

“These findings are intuitive given the increasing proliferation of robo-advisers,” CFA institute suggests.

Taking a step beyond simple awareness, CFA Institute also asked charter holders how individual investor clients may be impacted by the increased use of technology. Most respondents felt that “most financial advice tools offer relatively unsophisticated advice based typically on offering a diversified portfolio.”

“It is likely because of this stylized fact that 70% of respondents think mass affluent investors will be positively affected by automated financial advice tools, followed by other investors (67%) and high-net-worth individuals (41%),” the report explains. “The higher the wealth, the more likely that respondents do not think investors will be affected by automated financial advice tools, which are not yet capable of offering complex, tailored advice.”

NEXT: Other anticipated impacts among CFAs

According to the CFA Institute poll, the rise of automated financial advice tools may impact consumers through several mechanisms.

“Some of these impacts may be positive, others negative. Our survey suggests that cost, access to advice, and product choice are all viewed as more likely to have a positive impact on consumers,” the report says. “Respondents are most divided on opinions of the impact of financial advice tools on market fraud and quality of service, with quality of service being the most negatively impacted.”

Related to this, many CFAs apparently lack trust in the technology underpinning robo-advisers. Many suggested the increase in automated financial advice “may lead to new risks or the re-evaluation of existing risks. Forty-six percent of respondents note that flaws in automated financial advice algorithms could be the biggest risk introduced from automated financial advice tools, followed by inappropriate selling (30%) and privacy and data protection concerns (12%).”

However, even those advisers who are otherwise skeptical of the benefits of robo-advice highlight the potential cost-effectiveness of the approach. In the North America region, for example, 90% of CFA holders polled said greater use of robo-advice would have positive benefits from a cost perspective for individual clients and consumers in general.

Other specific concerns called out by CFA holders were that “automated financial advice tools are not likely to be able to account for behavioral biases in clients or to account for personal circumstances in a satisfactory fashion,” and the “increased risk of herding as more and more investors are directed towards passive strategies.”

Additional survey results are reported here.