Ten big discussion points from Space Money Talks “Financial Advice in a Digital World”

Ten big discussion points from Space Money Talks “Financial Advice in a Digital World”

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We think it is safe to say that a large number of IFAs do not want nor indeed believe they need to embrace digital advice. The reasons – spelled out very clearly by Plan Money’s Peter Chadborn at our recent debate entitled “Financial Advice in a Digital World” – are clear.

The prize for being an ‘RDR-survivor’ is to have a model that works for both the adviser firm and for clients with more demand for your services than you can meet. In such circumstances, most advisers would ask themselves why they would want to take on the risks, the potential liabilities and at worst business threatening fines that providing digital advice could bring.

That didn’t mean, as Mr Chadborn made clear, that he wouldn’t embrace digital – he would particularly as client expectations shift about how they might be served and serviced – but he could not see his business crossing the line into offering full digital advice.

That brings us to a very interesting situation. It is very possible that the real automated advice revolution comes not from stand-alone digital advice businesses – though there may well be some dramatic success stories from this growing sub-sector – but from a huge transformation led by and based around the existing financial advice infrastructure.

There will certainly be no shortage of advocates. One of the reasons Digital Wealth Insight’s founder Ian McKenna wants to ditch the term ‘robo-advice’ and ‘robo-adviser’ is its dystopian connotations that get in the way of a broader embrace of digital by advisers and by clients and customers. He notes that term was coined in the US by a traditional adviser who wanted to knock the concept, but who has now changed his mind.

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It could also see advisers defining themselves against something that they have – to all intents and purposes – already embraced. Technology has already transformed what advisers do across the range of internal business processes including a great deal about the advice and investment solutions on offer to clients. Technology is one of the key drivers in advisers’ choice of business partners too – the back office and platform choices being the main ones.

We would argue that much of this change has been about driving efficiencies and improving compliance. This is also likely to have been excellent news in terms of advice firm profitability.

But it hasn’t grown the sector in a transformative way and this may be what further automation holds out the hope of.

Two examples raised in the debate make this very clear. First Sheriar Bradbury’s firm has taken over nearly 50 small IFA businesses. This has brought Bradbury Hamilton 2,000 full financial planning clients but he is still seeking ways to reach around 50,000 others on which they hold data through a digital service. That isn’t likely to be full advice though he says it’s likely to involve an adviser in the process given the current regulatory set up.

The analysis of LEBC Group’s chief executive Jack McVitie is also revealing. He says that having worked with many clients from the retail sector, who have been grappling with the internet threat for nearly two decades – they divide things into online, offline and digital which combines the two. In the financial advice world, Mr McVitie dubs this digital half way house with the headline grabbing term ‘bionic advice’.

Yet it also means meeting client demands in terms of how they want to be served. “This is about allowing the person to choose how they interact with your business and as they want to interact at the point where they decide to interact,” he said.

This brings us to one final point made by Distribution Technology’s chief executive Ben Goss – suggesting the digital challenge, often seen as one of creating and generating demand, may actually be more on the supply side.

He said: “It’s a cost to serve problem.  Advisers that want to grow their practices have realised it’s too expensive to do it through traditional means.  They have moved their customer bases up and to the right as in they’ve got older and wealthier. But they’re not able to talk to people who are earlier in their wealth-creation journey and engage with them profitably, economically. As technology is made available, what we’ll see is huge changes in the way in which advisers are able to deal with clients and customers.”

At Space, we think it is safe to assume that as the demands of existing clients change, it is probably already wired into the DNA of adviser businesses to adapt.

When it comes to what may be untapped demand – admittedly a moot point – we think our initial question may need a little bit of refining.

If they have the right tools, do established advisers want to be involved in meeting untapped demand for financial advice or do they want to leave it to others to do so?

We have highlighted what we believe to be ten of the most significant discussion points from this debate, setting out the views of advisers, new digital players and of the firms who want to help advisers take advantage of the ongoing digital revolution.

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