The Swedish Pensions Agency (Pensionsmyndigheten) has put out a warning about the use of robo-advisers by private pension providers to help customers make investment decisions, saying the automated guides give limited benefit.
The agency, which is reponsible for Sweden’s state pension and advises on the whole pension system, said using robo-advisers carried a risk that long-term savings could be invested with too little risk, and also said people were often unaware what were being charged for their service.
Ann-Christin Meyerhöffer, market analyst at the Swedish Pensions Agency, said: “Robo-advisers can certainly help savers to limit their choices on how to invest their money and spread the risks.”
She added that robo-advisers could be beneficial for those approaching retirement, when it was appropriate to reduce the risk level.
“But in long-term pension savings, it is both easier and cheaper for most people to invest their money in a global equity index fund with a maximum fee of 0.20%,” she said.
The Stockholm-based authority said that a survey it had commissioned - carried out in the first half of November and involving just over 1,000 interviews - showed that just over half a million people used or had used robo-advisers and that nearly 800,000 people might consider using them.
Half of those who used the automated guides had done so regarding retirement savings, it said.
An increasing number of financial services providers, such as banks, it said, now offered various forms of automated digital advice on saving in funds and equities.
The poll showed that three out of four people who used or had used a robo-adviser did not know what they were paying for the counsel, with and two in three being unaware what they were paying in management fees for the funds the robot had recommended, the Swedish Pensions Agency said.
Although robo-advisers did not always use the word ‘advice’ in their marketing, the agency said savers could still perceive the investment proposal as advice.
“But there are important differences,” it said.
“In robo-advice, for example, there is no opportunity to have a dialogue about the family situation, financial situation, other existing savings and what risk the saver is prepared to take,” the agency said.
The robo-adviser risked putting the user into a savings position with a risk level that was not optimal for them, it said.
“When it comes to long-term savings, a saver can easily end up in a savings plan with too low a risk level, and therefore expected value development that is too low,” said the agency.