Life companies could exploit new robo-advice technology simply to churn their own products under the guise of providing consumers with impartial advice, Royal London chief executive Phil Loney has warned.
Speaking to Financial Adviser, 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.
LV’s 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 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.
Matthew Harris, director of Harris Independent Financial Advice, said it was inevitable that some product providers would try to exploit robo-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.”