Page 34 - Profile's Unit Trusts & Collective Investments - March 2025

CHAPTER 1

his or her portfolio on an hourly rather than a daily basis, and this constant and rapid adjustment of
asset allocation via derivatives frequently depends on automated trading.
Technology has also had a major impact on the way in which financial advisers do their jobs. Four
decades ago financial advisers were completely dependent on printed literature issued by
management companies. Today, it is almost unheard of to encounter a financial adviser not equipped
with a laptop computer, on which detailed information about clients and products is available on an
investment platform. Armed with his or her laptop and an internet connection, the modern financial
adviser can download details of a client’s holdings, access up-to-date information on products, print
the latest application forms, and, for some products, submit a proposal electronically without lifting
apen.
The internet has, of course, also had an impact on investors. This goes beyond the immediate
access of up-to-date information which the internet offers. The breadth and depth of information
now available enables well-informed investors to make product comparisons and to conduct
independent research.
Direct Access
The growth of the internet led to speculation in the late 1990s that the character of the industry
would change, because of the ease of access to financial products it creates, to the point where most
transactions in the collective investments industry would occur directly between investors and
management companies (or LISPs/platforms) and that the role of financial advisers would diminish.
Such predictions seem even more relevant today. Investors across the spectrum of age and
education show a greater awareness of the costs of financial advice, partly because of the rise of
passive investing, which challenges the value of active management and, by implication, the value
of fees paid to advisers for fund selection.
In the internet-driven world, the vast majority of retail products in the financial sector can be
accessed by investors directly from product suppliers. This is particularly true when it comes to
investments, but related products like life insurance are also increasingly available online.
Technology experts believe we are only at the start of the Fourth Industrial Revolution (4IR),
which has already changed how consumers interact with service providers (retail investors, for
example, trade shares using free phone apps, and even conservative investors can rebalance
portfolios or switch funds online with the click of a mouse). These developments have made many
financial advisers worried about disintermediation.
Articles appear frequently discussing the roles that financial advisers will play in the future.
The rise in direct access investing via web browsers and apps confirms survey data that suggests
younger people are increasingly willing to manage their own investments using online tools, a
trend that may necessitate changes in traditional advice models.
It can be argued that many retail investors lack sufficient understanding of the financial
markets to make appropriate investment decisions even with the help of online tools. Financial
advisers in the future may act as coaches rather than intermediaries.
The long-term impact of the trend towards direct investment, however, remains to be seen. In
some countries – the UK and Australia being particular examples – less affluent investors find it
increasingly difficult to get advice from financial planners. The continuing trends of online access,
disintermediation and increased regulation may adversely impact those segments of the
population most in need of financial advice.
Robo-Advisers

A robo-adviser is a computerised “financial adviser” providing financial guidance – and
sometimes full-blown portfolio management – via an online platform. Robo-advising as a defined
service category emerged in 2008. Global robo-advice assets under management (AUM) have grown
dramatically and now represent a sizeable segment of the market, especially in the USA.
Robo-advisery platforms fall into two main categories – “pure” robo-advice services, and hybrid
services. The latter allow access to human adviser services if the user gets stuck or wants help,
and/or include reviews of investor portfolios or decisions by actual human beings. US-based

32 Profile’s Unit Trusts & Collective Investments — Understanding Unit Trusts