He added: “A lot more people will move towards an online solution in the future. Sure, people will be suspicious of the system at first, like they were with online banking, shopping and even dating.”
Another key aspect of investment management is taking advice – there are websites for that too. Money on Toast, for example, offers a discretionary fund management service as well as advice on investments, mortgages, pensions and insurance using algorithms based on knowledge of all their financial advisers.
As with a human adviser, the robot adviser guides the customer through a series of questions designed to assess their financial and personal circumstances, and then creates a tailored report of recommendations.
There is also a white-labelled version of the system to enable other advisory firms to use the technology to offer online advice to their own client banks. Charlie Nicholls, partner at London-based CPN Investment Management, the parent company of Money on Toast, said there are many online advice services that are just as good as a human adviser – in some cases better.
He said: “This is particularly the case for simple products such as Isas and general investment accounts. When we look at the US market we see that “robo-advice” is already picking up significant market share, with some companies holding billions of assets under management, for example, WealthFront.
He added that the main advantages of Money on Toast’s online offering were its low cost and the compliance and audit trail capabilities – supposedly designed to make mis-selling more difficult.
“However, I do not think it will replace them entirely as there will be some more complex areas of advice, and indeed some types of clients who will still want to see a face-to-face adviser.”
Online investment management services have blown the door open for more people to have a chance to invest in funds, according to Mr Hungerford.
He added that the fee for the use of these systems is generally below one per cent and there is usually a low minimum portfolio value required to use a robo-adviser, whereas some brokers stipulate a six-figure minimum value.
Robo-advisers are also able to compete with IFAs when it comes to convenience – though a large number of advisers have utilised and embraced modern technology to offer the best service to their clients. However, robo-advisers go a step further. While claiming these system do not measure up to actual investment managers, Paul Coffin, chartered wealth manager at Capital Financial Markets, based in London, admitted that they are good for people who do not have the time to learn the finer points of investing.
