Advisers should not feel threatened by robo-advisers, pointing out it will bring suitable investment options to a larger audience.
According to Frazer Wilson, senior consultant at Thomas Miller Investment, says the big difference is that traditional financial advice companies start with the question: “why should you invest?” rather than “where you should invest?”
But some humans in the supply-chain of financial advice will be dislodged by robos, warns Paul Resnik, director of investment suitability experts FinaMetrica.
Although disruption from technology happens in all industries at all times, the strategic threat from robos is that they lower barriers to entry, Mr Resnik says.
He says: “Established financial services companies could face new competition from unexpected competitors – people who control ‘communities’.
“The cost of acquiring a customer within a community is a fraction of going to the wider market. We all know this to be true – it is why financial advisers join the golf club.
“So who are the ‘controllers’ of today’s ‘communities’? They are all around us.”
Mr Resnik says the threat to advisers could come from corporations, community groupings and associations and people who have followers.
He says: “Branded robo-advisers are quick and relatively low cost to deploy if you can supply the customers.
“A robo will let you lead your followers off the traditional financial services grid, away from the established industry players.”
But it is highly unlikely standalone robo-advice is going to threaten traditional IFA business practices in the short to medium term, says Ben Goss, co-founder and chief executive of Distribution Technology.
However, Mr Goss says advisers need to remember history tells us that digital services are very good at creaming-off simple, easy, transaction-like activities and delivering these with high customer satisfaction - just look at aggregator websites in travel, Uber in taxis or general insurance online.
Mr Goss says: “Simpler parts of the advice spectrum can be automated and if delivered by a trusted brand and well marketed they absolutely will impact on traditional business.
“The most trusted sector in financial services are financial advisers. There will no doubt be a great opportunity for advisers to use fintech to address certain client segments and deliver certain services.
“We are working with our clients to understand what these are. There has already been a revolution in the adoption of digital asset and risk modelling by advice firms over the past decade and this is radically reducing the cost and risk of delivering advice and improving profitability.
There will always be a place for human interaction. This is where financial advisers have a real advantage Nick Eatock“Extending this so that clients interact more directly with the technology is an obvious next step.”
Robo-advice should not be a threat to traditional financial advice for those that adopt it, says Nick Eatock, founder of Intelliflo.
Mr Eatock says robo-advice should be seen as complementary to a full-advice model.
He says advisers are uniquely positioned to offer this omni-channel approach and will be the big winners of this capability across a wider set of clients.
Mr Eatock says: “Self-select websites, direct investment platforms and robo-advice are all gaining in popularity, not because the technology allows them to develop but because they tap into what many consumers want in this digital age: instant information and solutions to their particular needs.
“This need for instant information will continue to grow. However there will always be a place for human interaction. This is where financial advisers have a real advantage and an opportunity to cement a profitable future.
“The opportunity lies in adopting the technology that enables them to offer clients the best of both worlds: instant access to consolidated information about their financial status (including how much is in their bank accounts, their mortgage payments, investments and savings regardless of the provider, plus access to self-select low-risk financial products) combined with the ability to tap into the expertise of a fully qualified adviser as and when required.”
