The Rise of FinTech Within Financial Advice

How Fintech is Transforming Financial Advice Today

By Toby Larkman, Chief Commercial Officer, Embark Platform

FinTech is now ubiquitous in conversations about the future of business. In many instances, it has revolutionised the way companies work, and, over the past decade, the UK has positioned itself as a leader. The necessary distancing created by Covid-19 has sped up innovation and the adoption of technology by the financial sector even further. But, what about one of the more traditional areas – financial advice?

Twice a year, we conduct the Embark Investor Confidence Barometer, a survey into attitudes amongst financial advisers, as well as advised and non-advised investors. This has confirmed what we already knew; FinTech has not passed the advisory world by.

The most recent edition found that 66% of surveyed financial advisers felt that FinTech had improved their ability to serve clients. 80% felt the same about technology more broadly. This mirrors the startling growth of the FinTech industry, 37% of which, according to Deloitte, is positioned within WealthTech in the UK.

FinTech is becoming ever more prominent within financial advice, but how is it actually being adopted? And how are investors reacting to its growth?

Automation and AI

FinTech has already automated a number of financial advice processes, and, according to our Barometer, there is an appetite for this to go further. Increased automation was selected by 24% of advisers surveyed as the greatest benefit FinTech offers the industry.

Financial Advisers see the automation of some operations as a way in which they can improve their service. For instance, intelligent technology can now alert an adviser to schedule a client review based on their changing circumstances or life milestones. And, over three quarters (76%) of surveyed advisers felt that additional automation would allow them to improve their service further.

Intelligent Communication

Advisers also cited an ability to communicate with clients digitally and securely, and being able to do so in multiple ways, as other significant benefits of FinTech.

This is perhaps unsurprising given the rise of remote working and the shift away from face-to-face client meetings over the past few years. Some firms have taken this further, for example, by using augmented reality to communicate their insights. This technology enables impactful communication that can be tailored more specifically towards the needs of individual clients.

Open finance

Perhaps slightly more surprisingly, most advisers said they would consider using Open Finance as part of their advice process – and clients appear to be open to the idea.

Open Finance builds on the data-sharing principles of Open Banking by including a wider range of products, including savings and investments.

More than two-thirds of advisers (69%) agreed they would consider using Open Finance, while a similar proportion (64%) of advised investors would be comfortable giving their adviser real-time access to their financial transactions to help them stay on track.

Robo-advice

What of one of the most talked about FinTech innovations – robo-advice. In 2021, robo-advisers had nearly $1.4 trillion in assets under management globally, and this is expected to continue to grow rapidly.

According to our Barometer, most advised investors (57%) would be comfortable paying for automated advice with no human contact. Only a slightly larger proportion (60%) would be comfortable paying for digital advice with an option to speak to a person. The youngest age brackets (35-44 and 45-54) were the most comfortable with robo-advice, with 62% indicating comfort, though this fell to 33% of those aged 55-64.

If most clients with an adviser are comfortable paying for robo-advice, is this a problem for conventional financial advice?

Firstly, there is a difference between saying you are comfortable with something and acting on it. We cannot know that any of these clients would be prepared to leave their adviser for an online alternative. Secondly, we might expect people who currently access financial advice to be more comfortable with advice solutions in general – or at the very least to say they are.

The future

The financial advice industry should consider these findings in the context of their future adoption of digital options. If anything, they show that clients want to hear about digital developments, and how they can benefit.

The take-up of robo-advice may be relatively low in the UK, but that doesn’t mean it won’t attract large numbers of investors in the future. After all, advisers’ own faith in technology is high and growing.

Only the surface of FinTech’s potential has been scratched and the future opportunities that it promises herald a hugely exciting time for the advisory world.