Fund risk-rating and financial planning tools company eValue plans to enter the pensions advice market with a cut-price in-retirement robo-service aimed at those with smaller nest eggs.
Designed to help people who are drawing down their pension make financial decisions, the service, set for a September launch, will show a spectrum of likely future investment returns depending on how a person invests today.
It will use an economic stochastic model designed by Bruce Moss, director and founder of eValue, and work on probability distribution and how long a person might live.
The planned proposition will be designed to help those in drawdown make decisions on the basis of this modelling, at “a fraction of the cost” of traditional advice, according to Mr Moss.
He told FTAdviser the new service for those already drawing down their pension savings aims to fit a gap in the current robo-advice market, which has focused on accumulation investment.
“After buying a house, retirement planning is probably the second most important financial decision people make in their lives,” he said.
“We have been looking for a year now at robo-advice for retirement and we will have something towards the Autumn.”
Most recently, Standard Life and Scottish Widows announced plans to enter launch robo-advice services, as they target the generally lower value but mass scale direct-to-consumer market.
Standard Life will be automating parts of its financial planning proposition to offer a direct service to clients, while Scottish Widows has been looking into developing a form of robo-advice.
Following pension freedoms giving retirees unfettered access to their savings, introduced last April, Mr Moss said the market for robo-advice in retirement is huge.
“While annuities are doing very well, we still see 50 per cent of people going into flexi-access drawdown,” he said.
“So 50 per cent of retirees are taking drawdown - they will need to have something in retirement to tell them how much to take each year, and there are no simple answers.
EValue’s service is for those with smaller nest eggs, and not aimed at people with pension pots of half a million pounds - as “they should be going to an adviser”, he said.
He admitted robo-advice is not “as good as full face-to-face advice from an adviser”, but encouraged firms to embrace automated services.
“If I was running a firm of advisers and a section of my client base had relatively simple needs then this would be a way of offering them something, and an excellent way of scaling my business”
But Scott Gallacher, director at Leicester-based Rowley Turton said he is not convinced by robo-advice.
“Even with the at-retirement market, where there are normally less other factors to consider such as protection, mortgage, debt repayment, there are still a lot of complex issues,” he said.
“I doubt robo-advice will be able to fully research your existing plans and identify the existence of guaranteed annuity rates, guaranteed fund values or the possibility of higher pre-A day tax free cash. Nor I suspect will it cover review a client’s national insurance records.
“There is a real danger of people simply selecting the highest initial income without understanding the risks or adequately protecting their spouse and family.”
Daren O’Brien, director at London-based Aurora Financial Solutions backed “a place and room in the market for robo advice”.
However he cautioned the need for quality and “not simply just a way to shortcut full independent advice to make money outside of the FCA regulated advice process”.
In March this year, financial advisers criticised the Financial Advice Market Review’s recommendations on how better use of technology, in particular automated services, can improve access to advice.
The FCA plans to launch an unit dedicated to automated advice next month.
ruth.gillbe@ft.com
