The future of advice is a hybrid of human and machine — Harry Chemay
It was about 20 years ago that Harry Chemay’s disillusionment with the financial industry and, in particular, with typical investor outcomes, began.
In the latest episode of the Intelligent Adviser podcast, he recalls his thought process at the time: “The investor takes the risk, the investor puts all the money down, and the investor should get the lion’s share of the return from the market. But it just doesn’t happen. I thought there’s something fundamentally wrong here.”
To cut a long story short, Harry, who is originally from Malaysia, ended up running his own financial advice firm, and then co-founding a robo-adviser, Clover.com.au, based in Melbourne, Australia.
The role of robo technology
In the podcast, Harry explains how, in his view, the future of investing and financial advice is “a hybrid of human and machine”.
“Robo-advice isn’t going to take the place of a quality adviser,” he says. “But it is a very clean and simple way of someone getting a piece of advice on their own terms, in their own time, in their own home.”
“The idea (with Clover) is to let the machines do what they’re good at and let the humans do what they’re good at.”
A keen cyclist, Harry Chemay likes to use the bicycle as an analogy for what firms like Clover offer.
“The bicycle is the most efficient way of moving from Point A to Point B,” he says. “Even the human body, by running or walking fast, can’t beat the efficiency of man and machine working together. I use that as an analogy for robo-advice and how it can benefit both advisers and consumers.”
Inspiration from Jack Bogle
One of the people who most inspired him in founding Clover was the late Jack Bogle.
“Bogle was a pioneer,” says Harry. “We talk about robo-advice as being on the cutting edge. What Bogle did in 1976 with that very first index fund, computing the weights for the different stocks, that was phenomenal. He was the pioneer of fintech."
Another reason why Harry Chemay admired Jack Bogle so much was his honesty, and the way that he wasn’t afraid to tell people the truth about investing, and especially the failings of active money management.
Is the Royal Commission a turning-point?
Although active management is still far more popular in Australia than passive, Harry hopes that the publicity surrounding the Royal Commission into Australian financial services has made people more likely to question it.
“So much damage has been done to the Australian public,” he says, “and finally the veil of secrecy has been lifted. What Judge Hayne (who chaired the the Commission) could do was to put people on the stand and force them, under threat of perjury, to tell the truth. Some of the things that came out were truly shocking.”
Harry believes the Commission’s findings have huge implications for the Australian financial advice profession, and in particular the importance of aligning the interests of advisers with those of their clients.
As he explains on the podcast, “Charlie Munger says it best when he says, ‘Show me the incentives and I’ll show you the outcomes.’ The incentives were completely misaligned in wealth and financial planning and in superannuation in Australia.”
You can listen to the interview with Harry Chemay here:
Intelligent Adviser Podcast: Episode 14
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