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

Chapter 1 History of collective investment schemes

AI and machine learning is also being used to optimise asset allocation and the risk management
of portfolios.
Products such as hedge funds are also highly dependent on technology from an asset
management point of view. A fund manager making extensive use of derivatives may seek to adjust
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 a pen.
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

32 Profile’s Unit Trusts & Collective Investments September 2025