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‘Digital solutions are not going to solve advice gap’

Online services offering simplified advice or ‘guided’ execution-only mechanisms, including any attempt to launch a government-backed service to boost retirement saving initiatives, will not solve the yawning advice ‘gap’, Old Mutual Wealth’s customer director has said.

During a panel debate at the Tax Incentivised Savings Association’s annual conference in London, Carlton Hood questioned plans outlined by Mark Hoban MP for a digital service earlier in the day that would be designed to work in tandem with new pension freedoms.

He also dismissed a lot of the current rhetoric around online services, which sit outside of full advice and many believe will provide the solution for mainstream clients, warning they are not a panacea and that the key was going to be increasing ‘engagement’.

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Mr Hood said: “We have been very adviser-focused, but looking as well at developments in the digital space. It is becoming a popular channel, but it is the confident investor who is moving away from financial advice and the mistrustful investor that is going there.

“We have got to do more than just putting out online services. We have got to make it easy and give people peace of mind; there is lots of earnest stuff on the web, but not engaging stuff.

“I generally think digital services on their own are not going to solve it. We have got to engage a lot better with customers than we have done in the past.”

Old Mutual itself has intimated a number of times that it is likely to broaden an existing exclusively intermediated offering to include a D2C channel in the future, after it first suggested it could seek to do so back in 2012.

Mark Hoban, former minister at the Department for Work and Pensions and financial secretary to the Treasury, had revealed in his speech to delegates that he was pushing for digital technology to form a ‘retirement savings service’.

Aimed at people who do not feel they can afford to see a regulated financial adviser, he said the service would not provide detailed financial advice but would “help people on lower to middle incomes to make decisions”.

Professor Peter Tufano, Peter Moores Dean at Said Business School, said there were limits to what technology could do to increase engagement with saving for the future. “People understand more about moving money from one place to another than moving money from one time to another.

“There is a very simple concept about paying your future self. It is easier to think about paying yourself a month from now but not about paying yourself 40 years from now. Some of the fundamental drivers of human behaviours are not driven by technology.

He added: “But young people do not wear wrist watches any more. They carry mobile phones. People will willingly share their financial information on websites in a way that our generation just would not.”

The Financial Conduct Authority has been keen to inspire new routes to market, in particular through technology as part of its project innovate programme, which includes attempts to bring new, simple advice models to market.