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Panacea Adviser survey: 89% of advisers say Robo-Advice is a threat to the industry

Panacea Survey for Financial Advisers and Paraplanners

14 Jul 2016

Panacea Adviser survey: 89% of advisers say Robo-Advice is a threat to the industry

Almost nine out of ten financial advisers warn that automated services pose a threat to traditional face-to-face financial advice, research by Panacea Adviser has revealed.

In a survey asking 118 financial advisers whether robo-advice presented a threat or opportunity for face-to-face advice, only 11 per cent described it as a positive for their industry while the vast majority raised concerns that robo-advice could prove damaging to traditional financial advice.

Commenting on the results of the research, Panacea Adviser Chief Executive Derek Bradley, said: “With the amount of attention and industry debate sparked by robo-advice, it is perhaps not so surprising to see such a strong reaction from advisers towards the ‘rise of the robos’. The current mood appears more unusual, however, when you consider that automated services still represent a relatively small market here in the UK while the technology itself is also fairly limited at this stage.

“The US market also offers a glimpse of what looks like a more positive outlook for advisers when it comes to robo-advice. The ability to combine elements of both human and automated advice is actually seeing many traditional advice firms in the US prove more popular than robo-advice models that rely solely on technology.”

ADVISER VIEWS ON ROBO-ADVICE

The research also gathered adviser opinion on both sides of the debate, highlighting some of the key challenges – and benefits – that automated models can bring for advice firms.

Pete Matthew, Managing Director for Jacksons Wealth Management, believes marketing could prove the biggest hurdle for firms looking to adopt robo-advice. He said: “An online service can provide a way of perhaps serving ‘lower value’ clients in the short-term so that they engage with the adviser’s brand, which may well lead to higher-ticket business in the future.

“But while the technology behind robo-advice actually appears to be straightforward enough, the real issue is that most advisers are clueless when it comes to marketing. The world of marketing has changed immeasurably. Now, it is all about providing value to the prospect by educating, entertaining and inspiring clients to take action. The social aspect should not be underestimated either. Increasingly people buy based on the recommendations of social media circles and unless advisers are influencing within these channels, no-one will show up to their fancy robo-advice websites.”

 

Alan Hughes, Partner at Foot Anstey LLP, also calls for the FCA to clarify what constitutes ‘advice’ and ‘guidance’ in relation to automated-models. He said: “As robo-advice develops, advisers need to consider carefully how it impacts on the market, what that means for their own business and clients and how they can use this as an opportunity. Robo-advice will never completely replace face-to-face advice but it is a case of "ignore at your peril".

“Going forward, any further clarity that can be provided on the difference between advice and guidance will be very useful in bringing automated models to market. The FCA should explicitly address these issues and be proactive, rather than just tweaking the regulatory framework and then telling firms that they need to go off and reach their own view.”

Focusing on the regulation of automated services, Derek Bradley added: “A vital UK consideration that would assist in the adoption of robo-advice models is that the FCA approves the technology and their complicated algorithms. Some time taken now could mean that the constant retro aspect of regulation against products or advice is removed and public confidence in a ‘fit to fly’ model will see a greater, quicker embrace by advisers and of course the public.”

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Comments (4)

Just because you build it does not mean they will come. It's clear consumer behaviour is now driven to self serve. However this self service is underpinned by effective social media marketing. We are on the cusp of great change and any adviser who wishes a long term future will need to consider this very seriously. It will not suit all client segments but it has its place and should be embraced.

john joe mcginley   15/07/2016   09:50
A good point to make JJ.

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Derek Bradley   15/07/2016   10:00
Robo Advice is not a threat to the 'industry'. It's a threat to the general public. The reason that the Financial Catastrophe Authority is pushing is that, being a central planning organisation, it has a mechanistic view of society and human action. This is patently a fallacy, or in the FCA's case, a delusion.
Nevertheless there is a business case for a tools based self select service, for those who are motivated to look out for themselves. This self evidently ignores the motivational role of advisers to get clients to do something.
It won't fail. But like all things promoted by the failed FCA it will be chaotic in its deployment and leave a trail of disasters in its wake.

Steven Farrall   15/07/2016   10:04
We are Insurance Brokers as well as IFAs.

We've seen some real horror stories from the "Do it Yourself Brain Surgery" brigade.

In one of the worst cases, a university lecturer thought he had a good deal on his home insurance at £90 odd pounds a year, till he had a burglary and lost £42,000 of jewellery. The direct writer refused his claim AND gave him 7 days to place elsewhere. He should have had a high net worth home policy.

With robo-advice, we're going to see more examples like this with people's life savings.

It takes 10 years to train someone from scratch and then give them sufficient practical experience to let them loose on the public with minimal supervision.

As a nation, why would we be so stupid as to let a financially naive public think they can do it themselves?

An old adage is that someone acting as his own lawyer has a fool for a client. This not only applies to the law...

Richard Brown   15/07/2016   10:13

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