LV expects return on robo-advice arm next year

LV expects return on robo-advice arm next year

LV, the mutual insurer, retirement and investment group, is expecting its investment in robo-advice to being breakeven next year.

John Perks, managing director of life and pensions at LV, told FTAdviser the provider might start making a profit on its robo-advice service very soon.

He said: “Each time we get near to profitability we sign up another number of large schemes, so I think where we are seeing that small loss coming through is actually from positive reasons.

“There is potential for breakeven next year, but if not it might be the year after. It is in the near term, there are very strong income flows coming in now.”

LV acquired a majority stake in robo-adviser Wealth Wizards in 2015, and launched a robo-paraplanner tool last May, which helps firms provide retirement advice in less than two hours.

The provider has ploughed more than £80m into updating its technology during the last two years, the company said in its half year results today (13 September).

Considering only robo-advice, LV’s investment was worth around £10m this year, Mr Perks said.

The provider decline to disclose, however, the number of clients using its robo-advice services, or how many customers are needed to achieve breakeven.

According to Mark Polson, founder of Edinburgh-based The Lang Cat consultancy, it is unusual for a company to “break even this fast in robo-advice, or really in any tech business”.

However, Mr Polson said that LV has two advantages when compared to other robo-advice providers.

He said: “In big companies like LV they already have services in place, like legal advice for example, so they might have lower costs due to that.

“Also, LV is dealing with pensions. In terms of how the economics of retail investment works, most of the money is in pensions, so you are dealing with a bigger pot per individual.”

Mr Perks pointed to an expected increase in demand for rob-advice services from its workplace business, something other robo-advisers without a life company history are unlikely to benefits from.

“We are being very successful, there are a number of contracts currently being signed on the robo-paraplanner side, and we are also seeing a very strong traction coming from the corporate solutions side, with some very big schemes being signed up.”

LV is working with employee benefit consultants and corporate partners to provide specialist retirement advice and tools to their pension scheme members.

The provider has 19 such schemes either live or in implementation stage, the company said.

Mr Perks said that LV’s investment in its robo-advice services will be in line with this year's commitment.

The exact figure will depend on the mix of requirements from its clients, he added.

He said: “We are investing in various self-served technology, in the products that can come through our new quote and apply system, for example.