Digital advice

Robo-advice is financial advice delivered online via computer, tablet or smartphone. It uses algorithms and technology in place of a human financial adviser.

Also known as digital financial product advice or automated advice, it can offer convenient, low-cost financial advice, but before you use this service you need to be sure this style of advice will suit your needs.

What is robo-advice?

Robo-advice refers to financial advice that's delivered by a computer instead of a human financial adviser. You enter personal details, such as age, gender, income, assets, financial goals and risk tolerance, into a computer program and it generates financial advice, based on the details you entered.

Robo-advice is usually limited to one particular area, for example investment options. If this is the case, the advice you get will not consider other things such as debt management, super contributions, tax planning or the effects of an investment on Centrelink benefits.

Robo-advisers could be:

  • startup businesses
  • banks offering their customers investment advice
  • super funds offering their members advice on their super.

A robo-adviser needs to have an Australian financial services (AFS) licence or be a representative of an AFS licensee.

How robo-advice works

Digital advice is still developing in Australia, but this is how it currently works for different types of financial advice.

Personal advice

When you register with a digital advice website, you login to answer questions about your income and expenses, assets and liabilities, goals, objectives and risk tolerance. This gives the robo-adviser information about your financial situation and aspirations. The computer algorithm then considers this information when making recommendations.

The robo-adviser then produces an automated Statement of Advice (SOA) which explains the recommendations and other important information for you.

Your circumstances can change over time, so it's a good idea to check that the advice still fits your needs at least every 12 months, or whenever your circumstances change.

General advice

A robo-adviser who only gives general advice will not ask you about, or take into account, your personal circumstances therefore, you won't receive an SOA. You must be told upfront that you are only receiving general advice.

When you receive general advice, you'll need to decide whether the recommendation is appropriate for you, taking into account your goals, objectives and risk tolerance, before acting on the information. If you decide to act on the general advice and it is not suitable for you then you may not get the results you want from your investments.

Examples of robo-advice


Superannuation funds may use robo-advisers to give their members advice about optimising their super contributions or choosing suitable investment options within their fund.

While the advice may be automated, the implementation may not be automated. This means you may still have to call your fund or login to your super account to make the recommended changes.

Investment advice

Some digital advice services will offer investment option advice i.e. recommend a portfolio of investments for your personal circumstances.

Standard investment portfolios typically consist of exchange traded funds or managed funds.

While some robo-advisers will select specific investment options for each client, in most cases clients with similar investment objectives receive the same investment advice.

You may be asked to sign a managed discretionary account (MDA) agreement, so the robo-adviser can complete the trades on your behalf. This also allows the robo-adviser to automatically adjust the asset allocation of your portfolio if it strays too far from the original asset allocation.

Many robo-advisers use a broking serviceto carry out the recommended trades for you. You may need to transfer money to an account that is accessed by the broking service to make the recommended investments. Other robo-advisers only provide recommendations for asset allocation and rebalancing and you will need to arrange the investments yourself.

Think carefully about whether you want to sign control over to a computer or whether you would like to have control over the actual investment transactions.

Self-managed super funds (SMSFs)

Some digital advice services advise clients on whether they should set up an SMSF. You may be able to access these services directly or you could be referred to an accountant, credit provider or property developer, who may not be licensed to provide financial product advice.

SMSF advice is a complex area and there are limitations on what digital advice software can do. If you are referred to these services you need to understand what, if any, benefit the referrer could receive from the robo-advice provider. Also think about whether this type of service will satisfy your financial advice needs.

Paying for the advice

This style of advice may have lower advice fees than traditional financial advisers as they are not using people to assess your needs. Robo-advice may be an option for people who can't afford full service financial advice, only have a small amount to invest, or have simple advice needs.

Advice may be charged on a fee for service basis, and/or a percentage fee of assets under management, if you choose to implement the recommendations. You may also be charged a subscription fee for ongoing services, including regular newsletters or updates.

The financial services guide (FSG) and SOA should outline all the fees you will pay for the advice.


Alert iconGet help to navigate the financial advice process.

If you choose to meet with an adviser, our financial advice toolkit shows you how to prepare to meet them, what to expect in the first meeting and what to do after you receive the advice.

Things to consider before getting robo-advice

There are a number of things to consider before getting this style of financial advice.

Advice limitations

There are limitations on what digital advice software can do. For example, a computer will not clarify your goals and objectives, nor will it correct any details you enter. It cannot account for changes in your circumstances if you have a break from work, increase your debt levels or lose income due to sickness or injury.

Digital advice questionnaires may focus on your investment goals and risk profile but not ask about your mortgage, debts or other investments. This is fine if you have already addressed these areas of your finances but you need to know if the advice won't take into account your overall financial circumstances and needs.

Robo-advisers should explain upfront if they are only offering limited advice and should be clear about the risks associated with the advice.

If you believe that relevant information has not been taken into consideration, you should think carefully about whether the advice is right for you and whether the recommendations are appropriate.

The advice you receive will only be as good as the data you enter so it's important to enter your details correctly.

Updating your advice

Find out if and how your advice will be updated, in particular, if your investment timeline changes, your financial goals shift or there are other changes to your personal circumstances.

Portfolio rebalancing

If the advice you receive allows the robo-adviser to automatically adjust the asset allocation of your portfolio, you should understand when and why the rebalancing will occur. For example, will rebalancing occur quarterly or as soon as your portfolio strays more than 5 per cent from the original mix of assets?

You also need to be clear about any costs or tax liabilities associated with rebalancing your portfolio.

Asking questions about the advice

Because there won't be a real person giving the advice, you may not have a chance to ask questions. This may make it harder to understand the advice and decide whether it's right for you. Financial decisions are important, so if there's anything you don't fully understand don't implement the advice until you do have enough information to make an informed decision.

Robo-advisers may provide educational tools such as pop-ups, links to definitions, live chats, libraries of articles or newsletters through their website. These things can be useful but you may also benefit from doing your own research and seeking other points-of-view.

Fees and other costs

Before you agree to robo-advice, it's important that you understand the upfront and ongoing costs of the advice, and at what stage of the process you'll be paying fees.

Also find out whether you can withdraw from the service or any recommended products, whether there are restrictions on withdrawals and if there are any costs for doing so.

If you have a problem

The robo-adviser should also provide information about their dispute resolution process if you are unhappy with the service you receive.

See how to complain for more information about lodging a complaint about a financial adviser or financial service.

Robo-advice can be a convenient and cost effective way to get simple financial advice, however, there are limitations to this style of advice. Make sure you understand the limitations and are aware of the costs involved before you sign up.

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Last updated: 06 Mar 2018