Robo-advice could undoubtedly revolutionise the advice market but it is not the only digital innovation on the scene

Financial Advisory

Financial Advisory



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Moderator: Roderic Rennison

Expert: Sam Seaton – Moneyhub 

It’s all about technology, stupid!

Despite protestations to the contrary, it is generally the case that most intermediary firms in the UK have yet to fully embrace some of the changes that have and are taking place in the technology that enables what is often termed “robo advice” to be provided to their clients.

So what actually is “robo” advice bearing in mind that is such a widely used term? Investopedia defines robo-advice as: “an online wealth management service that provides automated, algorithm-based portfolio management advice without the use of human financial planners.” Robo-advisers use the same software as traditional advisers, but usually only offer portfolio management (often a decision-tree solution with asset allocation that leads to a solution,) and do not get involved in more complex aspects of wealth management, such as taxes and retirement or estate planning.

Robo-advisers are typically low-cost, have low account minimums, and attract younger investors who are more comfortable doing things online. The biggest difference is the distribution channel: previously, investors would have to go through a human financial adviser to get the kind of portfolio management services robo-advisors now offer, and those services would be bundled with additional services.

Omni-Channel, Multi-Channel and Cyborg; what are they and what’s the difference?

“Omni-channel” is the ability for an investor to interact with a company through multiple channels and experiences, such as their iPad, laptop, through social media or in-store, through a sales team or through other customer services and receive the same user experience from each channel, and be able to hop from one channel to another seamlessly.

With “multichannel”, investment providers offer their products on different channels (iPad, mobile, laptop, etc.), but they are not necessarily joined up and the user experience on each channel can be very different.

“Cyborg” combines technology with human advisers reached by phone or video chat or in-branch, and has been used increasingly in the United States.

So when and why should intermediaries engage with the new technology?

The answer is, as so often is the case, “it depends”. If an intermediary firm is solely focused on clients who value and pay for face to face advice then technology’s use is as an “enabler” to assist with more effective communication and servicing. There is however a growing realisation that a proportion of clients who value face to face advice also want to be able to access information online and in some cases transact without wanting to talk to or meet their adviser who instead they choose to consult periodically.

Where however, a firm has a segment of its client base that is uneconomic to provide a face to face advice service to, robo-advice may have a part to play to enable these clients to access the products that they may need.

That said, client engagement is an important aspect to carefully consider. Just because there is a robo advice offering available, it doesn’t mean clients will use it. The benefits will need to be effectively communicated and then clients will need to be helped to use the technology – and thus the reason for the use of staff to work with clients to enable clients to have the confidence to engage and transact. This combination has in many instances generated much better engagement leading to better bottom-line results.

It doesn’t have to be “all or nothing”

Against a backdrop of rapid and continuous changes and advances in technology, it’s perhaps understandable that so many financial intermediaries are reluctant to adopt the use of new technology.

However, it doesn’t need to be “all or nothing”. Taking incremental steps is often a better solution having first sought views from different client segments to (re-)confirm what services they want, their preferences in terms of how they want to be serviced, and how much they are prepared to pay.

Clients of different ages are likely to want their needs met in different ways; whilst clients in say, their eighties, may not in many instances want to actively engage via email or on the internet, this is much less likely to be the case amongst the “silver surfers” – a term commonly used for those over the age of 50.

The children of these clients commonly in their 20s and 30s will generally want to use technology to a much greater extent and not require as much face to face interaction.

In summary, the tailored use of technology to meet the needs of different client segments will help build and support the embedded value within an intermediary business and be a point of positive differentiation when the time comes for the business to be sold.

Technology is not in reality a threat; it’s a means of creating, building and sustaining value