Speaking to FTAdviser yesterday (13 May), Mr Loney said automated services being developed by financial services companies to bring low-cost advice to the mass market could be deployed as a veiled sales channel, which would be “anti-competitive” and not in consumers’ best interests.
“Robo-advice is what we make it,” he said. “But there is a danger that self-interested providers will use it to flog their own products. If robo-advice gets used to trap people in single providers, then that’s not in the interest of consumers.”
He said Royal London had “no plans” to develop its own full robo-advice service, but said he was keen to work with impartial robo-advice providers.
Rival LV is leading the pack on life companies’ moves into robo-advice with its regulated Retirement Wizard.
The service is restricted, and the only drawdown product it offers is from LV.
When asked to respond to Mr Loney’s warning, LV head of automated advice strategy David Stevens said Retirement Wizard offers consumers access to annuities from a panel of providers that cover around 90 per cent of the market.
“We made the decision to offer drawdown through the LV Flexible Transitions Account as this is a low cost product that offers consumers access to a wide range of funds,” he said, adding any regulated financial advice at the point of retirement can prompt people to shop around and get more from their savings.
He added Retirement Wizard does not favour LV’s own products over those of other providers available on the platform.
Mr Loney’s comments were part of a wider criticism of the new trend for large financial services companies to buy up every part of the customer experience - from advice to product - known as being vertically-integrated.
Rivals Aviva, Old Mutual Wealth and Standard Life, have all chosen this model in recent months. But Royal London has not acquired any financial advice businesses.
He said product providers should not be banned from owning advice firms, but added: “We should give them a different name – whether it’s controlled advice or direct sales – because consumers need to be able to distinguish between the two types of advice.”
Instead of following other life companies into the intermediary sector, Royal London has expanded its direct-to-consumer distribution business, which grew 179 per cent year-on-year in the first quarter of 2016.
It currently sells three products direct to consumers, including a funeral plan product, which is sold through the Co-op.
Mr Loney said the company plans to increase the number of products available direct to consumers, and is looking to foster distribution relationships with fellow mutuals such as building societies, rather than banks.
Matthew Harris, director of Harris Independent Financial Advice, said it was inevitable that some product providers would try to exploit rob-advice technology to sell their products.
“Product providers will always find clever ways to persuade people to buy their own products, whether it’s by buying up advice firms, developing robo-advice, or some other method. That’s the way it’s always been. And no doubt one of them will generate a mis-selling scandal at some point.”
However, he said he didn’t see robo-advice as a threat to traditional financial advice, saying: “I think there will still be a perfectly large group of people want face-to-face advice.”
james.fernyhough@ft.com
