Robo-advisers 'lack charging transparency' - report

'Marketing terminology' should be banned - Boring Money

Robo-advisers use overcomplicated language and do not communicate the full cost of investing to consumers, a report from Boring Money has claimed.

The research, which involved 15 consumers assessing 15 online investment propositions in "deep-dive" interviews, found just one of the testers could calculate the cost of investing a £1,000 sum using a robo-advice service.
Commissioned by the Financial Services Consumer Panel, the study also found that, without exception, all of the robo-advice propositions assessed did not include underlying investment charges in their fees. Furthermore, said the study, few of the 'robo' websites had clearly visible links to charges and fees on their homepages.

"Providing all-in fee illustrations in pounds not percentages need not be as hand-wringingly complex as many providers make out," said Boring Money managing director Holly Mackay (pictured).
"The industry has been told to improve disclosure of fees on many occasions. It will only have itself to blame if the regulator is forced to introduce specific rules on how the total cost of investing is to be illustrated to consumers."

The study also argued having consumers choose their own risk profile is "largely meaningless and unhelpful", which led Mackay to suggest the consumer journey was "broken".  

She said: "Language used online is still technobabble. Most people haven't got the foggiest what an exchange-traded fund or even a fund is. As for 'cautious', 'defensive' and 'balanced', they sound like psychological profiling rather than intuitive descriptors of an investment. The consumer journey is broken and we have to do more to help non-advised customers who want to make a start."
Following its research, Boring Money recommended "marketing terminology" such as the term "all in fee" should be banned immediately - unless it were truly showing the full cost of a product or service, including all underlying investment vehicles.
The firm also said robo-advisers should provide a fee calculator that showed the cost of an investment as an actual sum, rather than in percentages, and that non-advised services should not promote cost comparison charts that compare the costs of a fully-advised service with their own investment charges because it was a "misleading comparison".

A positive?

On a more upbeat note, Boring Money said providers should feel more confident and illustrate the positives of investing as well as warning of potential losses.