The City watchdog will give the green light to robo-advice services following its joint review with the Treasury into the financial advice market, according to Partnership’s Steve Groves.
Speaking today (6 October) at the Institute of Financial Planning conference in Newport, Wales, Mr Groves, chief executive of the life assurer, said that the somewhat controversial algorithm-based advice systems are among key insights into the future of the retirement landscape post pension freedoms.
He said: “I think the FCA review is going to lead to what I call robo-guidance - I know people call it robo-advice (but) I do not think it is advice. I think it is a form of guidance. I think the FCA is for allowing that to happen in the coming years.”
At the end of the last month, the Treasury told delegates at the FCA’s ‘robo-advice’ conference that both the government and regulator are looking to develop a ‘sandbox’ for innovation in this space.
Harriett Baldwin, economic secretary to the Treasury, has said the ‘sandbox’ could be a “safer space” for firms to experiment with ideas for consumers without the full burden of regulation.
“Once this is up and running it could help test potential ‘robo-advice’ models,” she added.
Ms Baldwin re-iterated the government’s desire to make the statutory environment appropriate, “knocking down barriers to entry”, citing one start-up that wanted to enter the advice market and was told its automated service would have to ask consumers 247 questions to comply with existing regulation.
Mr Groves also told delegates at the conference today (6 October) that a mis-selling scandal, as a result of the pension freedom reforms, is inevitable, adding the victims are likely to be individuals who do not seek professional financial advice.
When it comes to products, Mr Groves said that hybrid offerings combining annuity and drawdown elements, are likely to become commonplace, while standard annuities will disappear over time and variable and deferred annuities will become niche products.
He added that the pension freedoms are likely to be rolled back, the “absurd” lifetime allowance could be abolished and direct sales are set to become more “fashionable.
What is more, Mr Groves also claimed that product innovation post pensions reform are stifled by stringent regulation.
He said: “A clear message that we would want to send to the FCA is that there is an advice gap and regulation or perceived regulation is serious inhibiting the ability of the industry to innovate and that is happening to the detriment of customers.
“It is now time for the FCA, working together with the industry, to step up to the plate together and design a system that will work better.
“I think the advice system works very well for those who can afford to pay for it but we need to work with the regulator to rapidly find something that suits everybody.”
In August, the government and the FCA rolled out a review, which is currently gathering evidence, to examine the regulatory or other barriers firms may face in giving advice and how to overcome them.
Also under the spotlight will be ‘robo-advisers’ and the opportunities and challenges presented by new and emerging technologies to provide cost effective, efficient and user friendly advice.
It will also explore how to encourage a healthy demand side for financial advice, including addressing barriers which put consumers off seeking advice.
Proposals are set to be published in the autumn, with final proposals set to be produced ahead of Budget 2016.
