Robo-advice offers no threat to my business, say advisers

Three in four (78 per cent) financial advisers are confident that robo-advice offers no threat to their business, according to Aegon’s Technology in the Financial Advice Market report.

This is despite nearly half of financial advisers (45 per cent) expecting more demand for robo-advice over the next 12 months.

The Edinburgh-based life insurance, pensions and asset management firm found that the degree of concern felt by advisers correlates to the typical size of their client portfolios, with advisers whose client portfolios are at the lower end of the scale more alert to the threat from the lower cost option of robo-advice.

In some cases, this may also be explained where those with smaller portfolios may have less complex needs that could be served on a more basic, standardised approach. For advisers with client portfolios of more than £200k, 88 per cent feel it offers no threat to their business, and even for portfolios of up to £100k, the figure remains high at 73 per cent.

The advent of automated advice is still in its infancy but already it is estimated that in the UK the technology has already provided advice on over £1 billion of assets, out of total assets of 6.9 trillion in the asset management industry. And robo-advice is expected to continue making inroads in the financial services sector. Benefits could include cheaper cost, as well as the potential for speed, and as such it could play a part in potentially plugging the gap for those who need simpler advice but either aren’t currently prepared to pay for it or simply can’t afford it.

While the majority of advisers believe robo-advice is no threat to their business, a third (31 per cent) do point to robo-advice and similar digital services as one of the top challenges to the wider industry over the coming two years, a little behind Brexit (40 per cent), the greatest perceived threat. Advisers who manage less than £5 million in client assets are three times more likely to feel threatened by the technology than those who manage over £100 million (63 per cent vs 20 per cent), suggesting advisers with less scale consider the new technology as more of a challenge to their business.

Steven Cameron, pensions director at Aegon said: “The increasing use of technology in financial services is essential to engage customers in the future. It also provides opportunities for adviser firms to find new ways for people to access advice, particularly on less complex topics, which may not have been open to them in the past. This innovation has real potential to enhance adviser businesses, providing parallel advice and guidance offerings that can benefit customers and help close the advice gap.

“The poor customer take up of pure robo-advice propositions in the market today highlights the ongoing importance of the human aspect of an adviser’s service. For this reason we see robo-advice technology as being most likely to represent an opportunity for advisers to complement their offerings, and not a threat. Customers will increasingly come to expect digital services alongside traditional advice so it’s important advisers embrace technology and consider how best to deliver a seamless experience across digital and physical channels.

“Providers need to support intermediaries to create a successful market for advice and we believe robo developments will prove to be healthy for the adviser industry. As advisers grow used to the new innovations, they should prove to be a useful and valuable extension to face to face financial advice.”