What is so called robo-advice?
Quite simply it’s the provision of automated advice and investment services. The ability to input your information, answer a series of questions and be provided with both advice and investment solutions which is suitable to your circumstances. The idea is that an automated solution is a lot cheaper than a face to face financial advisor solution and that will mean that financial advice is made more accessible to the tens of millions of people who don’t or can’t see an adviser on the basis of cost.
The cost of face to face advice is a real issue because of the increasingly higher professional standards and levels of regulation which have been placed on the industry since 2013.
Importantly, robo-advice is covered by exactly the same rules as a financial adviser is covered by, which means that the advice given has to adhere to the same professional standards. The robo-advice providers are also covered by the Financial Services Compensation Scheme, so consumers get the same levels of protection.
However, the latest research conducted by the Financial Conduct Authority (FT Adviser 5/12/19) found that clients have not yet bought into the concept. The FCA’s survey showed that 57% of clients rejected the advice provided by a robo adviser. Even amongst the younger generation (18 to 35) only 53% accepted the advice, so it seems there is still a long way to go before the automation of advice is seen as a viable alternative to face to face advice.
Having said that, getting advice remains all important. Research from the International Longevity Centre found that savers who took advice back in the early 2000’s were on average £47,000 better off in terms of their pensions and other investments, than their counter parts who didn’t take advice. The research also showed that the benefit of taking advice and the uplift was far more beneficial to clients with more modest means, than those who were already affluent. Once again showing the value of advice, but also the importance of being able to make access to advice more widely available, which is why the robo advice market keeps trying to plug the gap.
In our opinion, there will never be any substitute for face to face advice and we can’t envisage a situation (any time soon) where artificial intelligence has the capacity to consider client circumstances, which can often encompass estate planning, for example, for an extended family network. Fortunately for advisers, the human touch is still key.