Branching Out. What will the future of advice look like?

Financial Advisory

25 May 2023

AdviceAIConsumer DutyFinancial AdvisoryMeeting of MindsTechnologyThe Future

Expert: Sonya Keshvara, Alpha Financial Markets Consulting


  1. Technology can help narrow the advice gap create efficiencies, but organisations need to remember to keep client needs at the heart of decisions
  2. Specific segments of the population are not receiving any advice or guidance for reasons ranging from a lack of awareness of services, to concerns about advice being too expensive.
  3. Technology can be used to deliver advice in a more cost-effective way and serve ‘lower value’ segments. However, selecting the right technology, implementation and settling time create significant hurdles to a smooth adoption
  4. Customer segmentation needs to be reconsidered in line with the evolving behaviours and needs of customers

Discussion points:

Could Consumer Duty widen the advice gap:
Evaluating the cost to serve across client banks has increased the difficulty in justifying fees for ‘lower value’ clients.

Consumer Duty has led to firms reviewing and segmenting their client banks, and as a result many are realising that it is not cost effective to serve segments below a certain threshold. Furthermore, the cost to serve is increasing overall because of the duty requiring firms to evidence how they are delivering good client outcomes.

Customer segmentation
This needs to be reconsidered in line with the evolving behaviours and needs of customers.

The traditional advice model is unlikely to remain attractive to some client segments in the future – for example, paying an annual fee based on the amount of assets a client holds.

The future of advice is likely to be driven by what clients need – i.e., there may not be a need for ongoing advice, and one-off / episodic advice, or guidance is required. It will be necessary for firms to look at their client bank and provide services based on their needs.

Although past years have shown progress in the simplification of suitability reports, the current state still requires change to lessen the complexity surrounding advice.

The intricacies of financial products and plans are often not understood by consumers. Suitability reports tend to be overly complicated and are lengthening because of the industry’s diminishing appetite for risk. The fear of omitting valuable information and being penalised for this has made them much lengthier and more difficult to read.

Although firms are trying to simplify reports there, there is still a lot of hesitation to reduce or remove wording in fear of future complaints.

Advisers are present to instigate changes for success and will build personal relationships with their clients. Although consumers have easy access to information online, it will take a significant amount of time for individuals to be willing to build tangible trust with AI and technological advice. Face-to-face contact and good quality advice will remain invaluable for clients who place value on that and can afford to pay for it.

The government should begin to add financial advice into the curriculum at an early stage. This will encourage engagement from adolescence and help the population become more self-sufficient and narrow the advice gap. The current regulatory framework also poses a challenge for firms looking to provide guidance to customers. Regulators should aim to simplify requirements in this area in a bid to narrow the advice gap and allow emerging technology to play a part in the industry.

Key takeaways:

  • The future of financial advice is positive - technology can improve the delivery of solutions in the industry rather than disrupt them
  • The future of financial advice is also positive as the distinction between technological advice and paid advice becomes clearer
  • AI and technology can potentially plug a gap to help educate and explain terms with less jargon