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 offering financial product advice 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.

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

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.

Self-managed super funds (SMSFs)

Some digital advice services advise clients on whether they should or shouldn't set up an SMSF. You may be able to access these services directly or you could be referred by someone else, such as an accountant, credit provider or property developer, who may not be licensed to provide financial product advice. If the robo-advice service has been recommended by someone else, find out if they will receive any benefits from the robo-advice provider for referring you.

SMSF advice is a complex area, there are limitations on what digital software can do and there are other important things to consider when deciding on a type of super fund. See self-managed super fund (SMSF) for more information about what's involved in running your own super fund.

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

Unlike a person, a computer will not clarify your goals or objectives, discuss any issues with you or make adjustments if your life is not going to plan. Here's a few other things to think about before you decide on robo-advice.

Advice limitations

Robo-advisers can offer advice on a broad range of financial topics, however most current robo-advisers only offer a narrow range of services. For example, a digital advice service may offer advice on which assets to include in an investment portfolio, but may not consider whether your money would be better used for other purposes, such as paying down debt or used for a planned upcoming expenses. This is fine if you don't need broader advice, but it's important to understand what the digital advice will and won't cover so you can decide whether it's appropriate for your current 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, think carefully about whether the advice recommendations seem appropriate for you.

Entering the correct information

The advice you receive from a digital advice tool will only be as good as the information you enter, so it's important to enter your information correctly. For example, a computer won't know if you enter an asset or income value incorrectly. It won't know if your circumstances change, for example, if you lose your job or increase your debt levels. It's your responsibility to make sure the information you enter is up to date and accurate.

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 helpful 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: 12 Nov 2018