Dan Jones  

Building on the back office

Dan Jones

A line in the sand has been drawn. After several years of fanfare and ambitious plans of conquest, robo-advice suffered a significant reverse in September when news emerged that UBS was to shut its SmartWealth offering to new customers in the UK.

UBS’s retreat underlines the fact that the industry is still working out how to incorporate automated services into customer propositions in a way that’s practical, effective and indeed, cost-effective.

Those who argue that automated services and their progeny will never prove a threat to advice will feel the battle has swung back in their favour. This side, not unreasonably, says face-to-face interaction is needed to deal with individuals’ unique circumstances.

To continue with the military analogies, Victor Hugo said the one thing stronger than all the armies in the world is an idea whose time has come. 

The time has not yet come for robo-advice – and it may not truly do so until a younger generation becomes advisers’ main client base. 

I still think a truce will eventually break out, with either side joining forces to form the kind of hybrid model discussed in Money Management’s August 2017 cover story. But at this point we should consider that advisers have already proved adept at incorporating new technologies behind the scenes: back offices have been transformed over the past two decades.

The repercussions of these shifts are still playing out. Back-office systems provider Intelliflo has been deemed valuable enough to be acquired by Invesco, one of the world’s largest asset managers. And as Mark Polson writes on pages 26-27 of this issue, advisers harnessing other back-office technologies themselves could ultimately pose problems for all sorts of different providers.

In the meantime, cash-flow modelling tools mean it’s easier than ever before to ensure clients receive a comprehensive plan that’s far superior to those of yesteryear. 

But there is still perhaps a question to be asked about these services. The very best advisers and planners will be heartened to have the basics of financial planning taken care of in this way – the tools allow them to consider the thornier points of a client’s circumstances in more detail. The fear is that those who are not the very best will increasingly use these plans as a crutch. 

For those intermediaries, automated advice is already here in all but name. And while it may look impressive to a client, advisers who imagine the machines have done all their work for them will inevitably miss out on something vital.

Being able to fully explain the advice given to a client, and spot the potential pitfalls of their situation while doing so, has another benefit. 

The business of financial advice should not just be about dictating to clients. Many advisers tell me their most gratifying moments can come when clients start changing their goals and desires.

This is perhaps counter-intuitive – on some level such changes involve a rejection of the original advice received. The satisfaction comes from observing those clients who are evidently learning from the advice process and becoming more financially literate.