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Nine out of 10 IFAs fear rise of robo-advisers

Nine out of 10 IFAs fear rise of robo-advisers

Almost nine out of 10 financial advisers said automated services pose a threat to traditional face-to-face financial advice, according to research by Panacea Adviser.

In a survey of 118 financial advisers, only 11 per cent described it as a positive for their industry, while the vast majority raised concerns that robo-advice could prove damaging to traditional advice.

Derek Bradley, chief executive of Panacea Adviser, said: “With the amount of attention and industry debate sparked by robo-advice, it is perhaps not so surprising to see such a strong reaction from advisers towards the ‘rise of the robos’.

“The current mood appears more unusual, however, when you consider that automated services still represent a relatively small market here in the UK, while the technology itself is also fairly limited at this stage.”

He pointed out the US market offers a glimpse of what looks like a more positive outlook for advisers when it comes to robo-advice.

“The ability to combine elements of both human and automated advice is actually seeing many traditional advice firms in the US prove more popular than robo-advice models that rely solely on technology.”

The research also gathered adviser opinion on both sides of the debate to highlight some of the key challenges and benefits that automated models can bring for advice firms.

Pete Matthew, managing director for Jacksons Wealth Management, said marketing could prove the biggest hurdle for firms looking to adopt robo-advice.

“An online service can provide a way of perhaps serving ‘lower value’ clients in the short-term so that they engage with the adviser’s brand, which may well lead to higher-ticket business in the future,” he stated.

“But while the technology behind robo-advice actually appears to be straightforward enough, the real issue is that most advisers are clueless when it comes to marketing.

“The social aspect should not be underestimated - increasingly people buy based on the recommendations of social media circles and unless advisers are influencing within these channels, no-one will show up to their fancy robo-advice websites.”

Alan Hughes, partner at Foot Anstey, called on the Financial Conduct Authority to clarify what constitutes ‘advice’ and ‘guidance’ in relation to automated-models.

“As robo-advice develops, advisers need to consider carefully how it impacts on the market, what that means for their own business and clients and how they can use this as an opportunity,” he commented.

“The FCA should explicitly address these issues and be proactive, rather than just tweaking the regulatory framework and then telling firms that they need to go off and reach their own view.”

At the start of June, the FCA launched its automated advice unit – announced in the Financial Advice Market Review report – to help firms develop fully or partly automated online services and other models that use technology to deliver lower-cost advice.