What do consumers want?
This is very well summed up, I feel, in the recent Cerulli Associates report: ‘Addressing Millennials, the Mass Market, and Robo-Advice’.
It stated that: “While some consumers may feel comfortable receiving all of their advice digitally, never interacting with a person, this is a small segment of the overall population.
“Most consumers want to know that they can reach out to a person to solve a problem with their finances should the need arise.”
How should advisers respond or adapt?
The Cerulli report mentioned above went on to say: “In addition, we anticipate that most, if not all, retail direct firms will have a digital advice offering within the next three years, and traditional advisers will also launch digital offerings for lower-balance investor accounts.”
Tools which allow firms to automate certain parts of the advice process are being tipped to take off in the UK (and, no doubt elsewhere as well).
The online system Advicefront, for example, invites clients to input their basic information and goals as well as fill out an appetite for risk survey.
The adviser delivers recommendations, either face-to-face or remotely, while Advicefront also offers tools such as custom model portfolios, automatic portfolio rebalancing and automated annual reviews.
Threat or opportunity?
While online services are often perceived as a threat to the advice market, tools which can automate part of the process turn the trend into an opportunity.
It is also important to realise that not all consumers need or have a requirement for advice on every financial decision.
It is therefore of paramount importance to know your market and understand how best to develop and service it. In the future, in my opinion, most clients won’t be either online or face-to-face, they will be both.
It is not advice, nor is it new. Be wary of headlines but be aware that increased automation is going to happen.
Remember that it does not work for most financial planning needs, only for simple financial aims and requirements.
Across Europe, advisers simply need to ensure that they provide advice and do not simply sell a product. A computer can do that.
Paul Stanfield is chief executive of the Federation of European IFAs