How do we measure robo-advice?

How do we measure robo-advice?

Measuring robo-advice is not easy to do at least not yet.

Global consultancy A.T. Kearney may have hogged the headlines when it suggested that US low-cost robo-advice will have led to a spectacular $2.2 trillion being invested within the next five years.

Yet it is probably wise not to read across too much to the UK. There remains a distinctly different regulatory set up in that even simplified advice carries much higher requirements around suitability and knowing your customer. For the UK, automated, robo or digital advice is still full advice for regulatory purposes.

Our little bit of caution about a direct read across is shared by, among others, Vanguard. We are interested in views about how robo will be measured.

We have set out a few initial thoughts about the various potential robo-channels by different types of business below and will be asking our expert panel for their views at our Space Money Talks debate “Financial Advice in a digital world” on 7th February.  Book your ticket here for free.

Pure robo-advice offerings in stand-alone businesses

We think this is by far the easiest part of the market to measure both in terms of number of clients and assets invested. These pure robo-firms may well come under great scrutiny as a result. For businesses that get off the starting blocks, we are likely to know quite quickly how much they have garnered by way of assets. For successful firms there will be little reason not to tell the market. Nutmeg one of our panellists is disclosing this information and it will be interesting to get their views on whether their peers will start telling us more and what it says if they are not.

Robo-advice offerings from fund managers, platforms and life offices

At Space, we wonder how much channel specific information, the big firms will provide. The divide between execution only, guidance and advice may feel as if it is blurring in practice, but it is intended to be crystal clear until the FCA says anything different. It will be interesting to see if the big parent FS companies, including platforms, which own robo-advisers or have developed their own services make specific disclosures about the amount of business that comes through a particular channel. Fund groups have, for many years, disclosed business information through the Pridham report so perhaps a similar idea could work here. Of course, where business is intermediated by a composite advice and robo-advice firm, it may not be clear what type of business it is in the first place.

Robo-advice offerings from IFAs

It looks as if more IFAs will embrace automated advice. Indeed, each week seems to bring news of a launch offering aimed at some part of an adviser’s client base or a set of potential clients. Exactly how this is measured may also present some practical challenges. Perhaps some of the supporting technology companies will disclose how much business is being done through their robo-services. We will be asking Mr Ben Goss and the IFAs Sheriar Bradbury, Peter Chadborn and Jack McVitie for their views.

But please come along with your ideas and questions on 7th February as we aim to get to grips with this exciting new market – book your place here.

 

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