Robo Advice is an automated form of financial advice that is tailored to the individual, based on the information that individual provides online. For clients, particularly those who might be planning their retirements, it appears to be a cheaper and more convenient way to receive recommendations. Will it really replace the real thing? Professionals in the finance industry are divided.
A threat to advisory business
Robo advice has been active in the UK since March this year, when the FCA gave it the green light. According to research from the Legal and General Mortgage Club, the new form of advice is seen by brokers as the greatest threat to their businesses, ahead of the unreliability and unpredictability of the world economy.
There are also concerns that while the advice is intended to be within regulations, there’s the potential for serious pitfalls. Paul Resnik, director of risk profiling firm FinaMetrica, highlighted the potential for automated advice being unsuitable if the wrong information is input – a typical ‘garbage in, garbage out’ scenario. However, he acknowledges that it has the potential to shake up the advice industry in a positive way.
Research from MetLife has discovered an opposing view, showing over 70% of advisers weren’t overly concerned about cheaper, automated alternatives to their services being launched, and just over 20% said that they didn’t believe that their business would suffer. In the same survey, 36% of customers said they’d prefer face to face interaction and independent financial advice.
Other firms are seeing it as an opportunity to increase business by joining the Robo Advice market. Simon Bussy, principal consultant for Altus, a firm that develops technology for financial businesses, has confirmed that companies ranging from large banks to smaller businesses are looking to provide Robo Advice. According to Bussy, innovation is important. He cited the challenge of developing something that revolved around the client’s lifestyle, and not a specific financial product.
Companies like https://www.intelliflo.com/account-management strive to ensure that IFA back office software doesn’t just help businesses cope with any new changes in regulation or legislation, but actually helps them benefit from the situation.
Robo Advice has already taken off in the United States, and while it will never replace personal, independent advice, it’s looking like it will become a major part of the financial advice market in the UK.