7th December 2015 at 2:49pm
Between 2005 and 2009, I was a mortgage and insurance advisor. I never really saw it as my vocation, but actually those four years were an amazing experience and in fact served as the perfect backdrop for the years that have followed, and my time in financial services as a User Experience Designer.
Working for a broker, I provided a full advice and recommendation service in a fast-paced sales-driven environment. It was exhilarating and high-pressured, but what was most fun was getting to know my customers; something I’ve taken into my current position. Whether in person or, more often than not, over the phone, they could be assured by certifications that I was genuine and my approach sincere.
From small acorns
The company was already tapping into new technology and opportunities; having started life with one phone in a bedroom it had become a large employer with banks of PCs and miles of internet cables. We were connected to our customer in more ways than one. Even with new technology appearing at an ever increasing pace, we were wondering what would happen next. As industries such as automobile and service were becoming ever more automated, would we suffer the same fate? Could our customer be served and advised by a computer? Then the crash happened; I changed career paths and followed my heart into the world of digital design.
Six years later, my heart and my head are in conflict as the same question surfaces once more. Is there a place for automated financial advice or to use the more quirky term – robo-advice?
What is robo-advice?
What robo-advice is not actually that well defined yet. It’s being billed by the techies and the media as an algorithm-based way of providing mass-market advice, financial or not, to customers. In this market, that’s mainly about portfolio management and the allocation of investments to asset classes. Bear with me…advice is given on the basis that the system matches to their ‘profile’, built through some sort of online survey.
Yes, this is a growing trend, and we are now starting to see the rise and popularity of these tools that gather personal data and can return useful suggestions or recommendations; however you could argue it’s actually much wider than that.
Robo-advice could easily encompass something as simple as going online and getting more general guidance on your finances. Forums were perhaps the start of this, where peer to peer advice was sought, but we’re now starting to see the growth of more focused and dedicated guidance sites such as The Money Advice Service for example. Even this little column could be seen as providing “robo-guidance” to the great and the good.
Robo-advice is not necessarily just the rise of these data gathering machines, there’s a lot more going on (and could be developed) than just these automatons!
The lines being drawn on robo-advice are not quite as clear as some are painting them and we think it’s well worth a look.
A low cost option
What is clear though is that people are more willing and able to self-serve than ever before. But they still want (and need) help, and are finding it online. Research by investment company Nutmeg says two-thirds of investors would be happy to rely on web-based advice, as long as the right tools are available
This is no more evident than in the US where robo-advice is flourishing. Meanwhile, the UK Government is looking at how financial advice can be made available to millions of people who cannot afford the fees charged by some specialists.
Full advice may cost upwards of £2,000 and most people can’t afford it, so there’s a gap for people who need some help, a steer of something easy they can do to improve their finances/financial health.
With research by the consumer finance site MoneyMagpie suggesting an increasing number of brits rely on YouTube for independent guidance about taxes, investments and other personal finance matters – perhaps the idea of robo-advice is not such a big leap.
A fact-finding exercise
So if there is an appetite for a more automated approach then how can it be satisfied? Full advice, replicating what you get from an adviser, is likely to need a full fact-find, the equivalent of filling in a tax-return, so could prove unpopular and there may very well still be a cost.
My initial thoughts are around something softer, that is quicker and easier to do, and doesn’t give “advice” as such, but more a steer in the right direction. A bit like a fitbit/health app – giving you a nudge to do something now and again rather than full personalised training programme.
How customers’ needs are understood is the next step. This is something I’ll be looking into and covering in the Angus Diaries as I speak to customers about how they want to receive online guidance.
Back to that thought about the automobile and service industries of 2009; they’re still here repairing our cars and serving us coffee. Yet today’s tech talk is now about driverless cars and drones delivering our pizza. The debate and conjecture rumbles on. So does the financial adviser.
The robo-advice market is still in its infancy, and in time we’ll likely see a focus develop around a few key areas of specialism based on what people need and respond to most.
There will always be a place for human financial advisers, particularly for those with complex financial affairs, and face to face advice still has a strong role to play. These developing capabilities are simply filling a complementary gap to provide people with a wider choice and means of finding and getting the guidance they need.
The information in this blog or any response to comments should not be regarded as financial advice and is based on our understanding in December 2015.