AUTOMATED ADVICE FOR FORWARD THINKING ADVISERS

Published : 11 years ago, on 27/03/2014

A great deal has been made in the press recently about Martin Wheatley’s announcement on the automation of financial advice. Mr Wheatley did not place a timeline on such automation, and his comments were made in relation to advice generally, with no specific reference to simplified /complex advice or the scale of automation. That said it is clear that, at least in the minds of the FCA, there is scope for this kind of advancement.

This should not come as a huge surprise to anyone with even a cursory knowledge of the Industrial revolution. A quick glance at almost any industry in the world will reveal the remains of previously manual processes which have been automated over time. But advances in technology are now bringing a new wave of jobs within the scope of automation. A recent academic study by Carl Benedikt Frey and Michael A. Osborne calculated a probability factor, ranging from 0 to 1 for the automation of 702 occupations and placed Financial Advisors firmly in the at-risk category with a score of 0.58.

Clearly advances in technology, processing power and data integration are making the previously impossible, possible but how close are we to the Holy Grail of fully automated, holistic advice for clients? Well, we aren’t there yet. Quite sensibly, people working on the automation of advice are largely starting at the simplified end of the spectrum, with companies like Money on Toast and Wealth Wizards offering the first stepping stones into regulated financial advice delivered by a computer. As technology advances, and the opportunities presented to firms becomes greater, it does not take a huge leap to the full automation of financial advice, for most people, most of the time.

Regardless of whether this fully automated and holistic financial advice is a pipe dream or not, the advice gap has expanded. The Retail Distribution review has caused a huge shift in the way that advisory firms select their clients, balanced by a shift in the way clients select their advisory firms. More explicit and transparent charging has left a segment of the previously advised market as untended. While the mechanisms to advise these clients may have disappeared, the requirement for advice has not.

Recent research from Altus suggests that platform CEOs is predicting a significant rise in the number of Direct to Consumer propositions in the market to service this band of clients. Several advisory firms and networks, for example Best Invest, True Potential and Strawberry, offer B2B2C propositions using back-end platform providers to ensure that the clients they can no longer afford to treat as fully advised are not lost to the big boys of execution only investing. Forward thinking companies will look past categorising clients solely on their net-worth, and will embrace the fact that people’s circumstances and requirements change over time. Not only are a proportion of these lower net-worth clients likely to become higher net-worth in the future, but there is a good chance these clients will require advice at different points in their life, regardless of their total asset value.

These clients will trundle along happily utilising employer provided pension plans and ISAs for a number of years, until a life event triggers a need for advice. It might be a death or a marriage, the purchase of a home or the progression into retirement. Whatever the reason, the client will require advice at this point, and will seek it from their most trusted source. For advisory networks and firms which have harboured that client as a Direct to Consumer investor for a number of years, they will be the first port of call, and it is essential that the process for clients to call on advisers is clear and easy.

The ability to be able to dip in and out of advice will be fundamental to the success of advice firms over the next few years, and should become a core aspect of the proposition for most firms. Offering automated simplified financial advice, with an easy access point for full advice when the customer wants it will bring firms closer to the ‘never lose a sale’ nirvana, and will also make the consumer experience far more pleasant for their clients. While replacing elements of their role with automation may seem counter intuitive for many advisers, swimming against the tide of change will always prove a difficult feat. Those who embrace automation, and integrate it with their propositions to provide something unique and engaging in the market place will be the ultimate winners.

Adam Jones, Senior Consultant at Altus

Altus is a business and systems solutions company meeting the unique needs of the Financial Services industry. From shaping a detailed outsource deal to automating transfers across the investments sector, our mission is to be at the forefront of the networked financial services business of the future. It is our practical experience of both the business of Financial Services and the IT systems which support it which enable us to solve the right problems with the right technology. www.altus.co.uk

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