Robo Advice. Threat or Opportunity?
In a recent poll conducted by for Panacea Adviser nearly 90% of advisers felt that robo-advice is a threat to their business. (*1)
If you stick your head in the ground and ignore the potential that technology can have on your business then you’re probably right. The current advice model is way too expensive and technology offers the potential to both lower the cost and widen the access to advice to a much larger section of the population. But as an adviser, should you be worried? Let’s look at some facts.
There has never been a time when people have needed financial advice more . Forty years ago, final salary workplace pensions were common place. As an employee you were automatically enrolled if you qualified and you didn’t have to think about your pension until you retired and often the only decision you had to make was whether you took the tax free cash or a higher pension for life.
Now everyone has to fend for themselves. Auto Enrolment, a great success based on apathy, has made workplace pensions the norm. But do employees understand the decisions they should make both in saving for retirement and more importantly at retirement?
“96% of employers think that the new pension flexibilities creates a need for more financial education in the workplace.” (*2)
The answer is that most people do not have a clue and are still in the default fund with minimum contribution levels. Get to retirement and the decision between annuity and drawdown, ‘pension freedom’, is pretty scary for most of us even if we’re lucky enough to have an adviser to talk the decision through with.
Very few people will leave really important decisions to a computer.
Research in the US, shows that as few as 6% would trust a machine to make all their investment decsions. 94% wanted human reassurance to backup their financial decisions. Most people (67%) wanted a combination of roboadvice backed up by an adviser for reassurance that the decisions they were making were suitable for them.
It’s fairly clear that there is a huge opportunity for advisers in a robo-advice world.
There are just not enough advisers . APFA – the association of Professional financial advisers research shows that adviser numbers (including wealth managers and bank advisers) have fallen by about a quarter between 2011-2014 yet the need for financial advice has risen.
So if the need for financial advice is rising whilst the number of financial advisers is falling it’s a sign that the model is wrong or at least needs adapting. Our advice to financial advisers is not to panic about robo-advice but to look at how technology can help revolutionise the way you do business.
“the sammedia moneyinfo service is revolutionary…”
Neil Greenaway, MD Clifton Asset Management.
The digitial marketplace for financial advice is coming, allowing clients to access financial services whenever it suits them, supported by a combination of robo and human adviser. The question is are you going to embrace it or let yourself be replaced by it?
At Sammedia, we specialise in helping firms get mega-efficient through digital technologies. If you want to find out more, then call us on 03303 600 300, email us on email@example.com or go to our website www.sammedia.com
*1 Panacea Adviser Poll May 2016