Page 31 - Profile's Unit Trusts & Collective Investments - March 2026

History of collective investment schemes Chapter 1

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.
Many advisers use discretionary investment fund managers for portfolio construction and are
focussing increasingly on helping clients identify lifestyle goals and manage their money to achieve
those goals.
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. It remains to be seen how online access,
AI, and regulation and the cost of financial advice will impact those segments of the population most
in need of financial advice.

AI and robo advice
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 US. R
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
Vanguard Personal Advisor Services and Schwab Intelligent Portfolios are examples of hybrid
services; Betterment and Wealthfront are examples of pure robo-advice platforms.
The advent of robo-advisers can be seen as a logical progression from the risk capacity and
needs analysis software programmes that have been used by financial advisers for decades.
Given the ubiquity of internet and broadband – and an increasingly computer-savvy population –
a rapidly expanding segment of the investing public feels able to complete such questionnaires
without assistance.
A robo-adviser platform typically requires the investor to complete online risk-tolerance and
risk-capacity questionnaires and makes investment recommendations based on the investor’s
responses.
The advent of AI that can provide answers to investment and financial planning questions is likely
to drive more consumers to use digital platforms for investment, retirement and financial planning.
According to the Financial Sector Conduct Authority’s (FSCA) Fit and Proper Requirements,
robo-advice (or “automated advice”) is defined as “the furnishing of advice through an electronic
medium that uses algorithms and technology without the direct involvement of a natural person”.
In order to comply with the Financial Advisory and Intermediary Services (FAIS) Act, a financial
service provider (FSP) that provides robo-advice must employ at least one key individual who meets
the FSCA’s competency requirements. These include a technical understanding of the algorithms
used in the robo-advice process. An FSP using a robo-advice platform must monitor and review the
automated advice generated on an ongoing basis and ensure it is sound and FAIS compliant.
As more and more firms begin incorporating elements of robo-advice into their online services,
the lines between traditional financial advice and robo-advice may become blurred, especially
where robo-advice platforms provide access to human-assisted online services on a needs basis.

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