A robo-boost for all advisers

The rise of automated advice is often portrayed as a battle between robots and humans but, asks Marilyn Cole, could it not end up helping everyone in the adviser community and wider financial services sector?

There has been a huge amount of debate surrounding automated advice – a subject often characterised as a battle between face-to-face advisers and their robo-rivals. Yet what if the spread of automated advice helped everyone in the adviser community and wider financial services sector?

The market in the UK has always been diverse in terms of distribution channels – though one can certainly see the arguments for why the robo-adviser might also be seen as a unique threat to human ones.

In the past, competition was represented by direct sales forces, then increasingly execution-only operations that rarely offered advice – or at least not as part of their initial service offering – while banks did provide advice with varying degrees of success and many well-publicised failures.

IFAs have coexisted with direct distribution businesses for many years and some have even benefited as persistent direct investors eventually sought out advice as their portfolios grew larger.

Now that the advice itself can be automated, however, it clearly offers the opportunity to a huge range of providers, platforms, fund firms and new entrants to gather assets on to their own books without the assistance of traditional advisers. Some may even see it as a competitive riposte to advice firms that often run their own centralised investment propositions and discretionary fund managers.

The big players may have the marketing heft but advisers are, after all, specialists in advice. They have coped with a rapidly evolving market over the years so they are hardly out of the game.

Indeed, while advisers cope with managing what is arguably an advice boom, many IFA platforms and back-office services are offering complementary automated services to their IFA clients. This gives them a means to attract assets and service customers and clients who might not quite meet the minimum thresholds for full face-to-face advice.

‘Bionic Advice’
The news from LEBC that it has generated £500m in assets from ‘bionic advice’ – a technology system that connects clients to advisers by internet or telephone – suggests advisers are equipped to hold their own by adapting their own solutions and creating new categories.

The market will clearly come under further scrutiny in the next few years and we will see which services have or have not succeeded although, for some businesses, it may be more complicated to measure than others.

Expect a lot of debate about what is automated or cyborg/bionic advice set alongside what may be a more liberal regime around guidance after the Financial Advice Market Review reaches its conclusion.

The interesting thing is – all this robo-activity may add up to an overlooked benefit for everyone. We suspect there is a huge head of steam of building behind the idea of the need for advice given the range of firms advocating for it – working out what message works, what advertising, marketing and social media strategies are most effective and more.

The industry is on a learning curve to see what works in terms of narratives, information and user journeys to drive automated advice.

Certainly, new and adapting models are also likely to stretch the willingness of consumers to use automated advice for more than accumulating assets. More broadly, however, it could help to normalise the need to seek advice by advocating it in new and engaging ways – whether that be attracting previously direct customers or new tranches of younger investors or near-retirees.

The very need to market these services for saving, investing and protecting more consumers and their families and to reach people navigating the pension freedoms may also help spread the advice message.

This could drive more business for everyone – a significant percentage of consumers we speak to in the course of our research insist on the fact that, for their important decisions, they want to speak to someone and sometimes that will be face-to-face.

Finally, maybe we need to think about extending our vocabulary a little bit more. We may eventually find ourselves discussing not ‘robo’ or ‘automated’ advice but ‘robo-education’, ‘robo-nudging’ and ‘robo-guiding’. And all these developments may encourage people to seek out financial advice – in all its guises.