Robo advice has been touted over the past 24 months as an answer to the advice gap.
Robo advice needs little introduction; it has formed the crux of many debates over the past few years.
Advocates of robo advice say it can offer a lower-cost, compliant way of dealing with less wealthy clients, or those clients whose needs are less demanding than, for example, someone wanting to do a defined benefit transfer.
As David Geale, director of policy at the FCA, explains, automated advice will lower the cost for both advice provider and the end consumer. Mr Geale says: "We believe technology and innovation can play a big role in reducing the cost of advice, ensuring consistently high standards of advice and increasing the accessibility of advice for consumers.
"Automated advice models seek to re-create the face-to-face advice process, for example through the use of algorithms."
For example, providers such as Wealth Wizards have already created algorithm-based platforms that enable the automatic generation of personal advice.
The team behind this captured the imagination of pension provider LV=, which bought a majority stake in Wealth Wizards in August 2015, with a view to offering a form of automated pension advice.
The technology also enabled LV’s in-house regulated telephone retirement service Cora to use Wealth Wizards’ advice platform to generate personal advice for pension savers planning for retirement.
The same month, August 2015, was when the government and regulators launched the Financial Advice Market Review, which examined ways to plug the advice gap.
In the Review, which was published in March 2016, robo-advice was hailed as one of several areas where development of technology-based services could go some way towards closing up the so-called advice gap.
Page 39 of the Financial Advice Market Review final report stated: “Technology, including fully automated advice models, has a key role to play in reducing the cost of advice and developing ways to engage consumers.
“Even where consumers continue to seek interaction with an adviser, most respondents agreed technology can complement advisers by reducing the time involved in, and therefore the costs of, the advice process.”
Fintech isn't just there to boost ways to advise clients and reduce the advice gap; it is also there to help make complying with various regulatory regimes easier for firms.
For example, earlier this month (March 2017), robo-wealth advisory firm Wealthify partnered with LexisNexis Risk Solutions to strengthen its anti-money laundering (AML) and identity compliance checks.
The alliance means Wealthify was able to reduce its compliance team down from five people to one member of staff (which is great if you are an employer, not so great for trade unions), and the speed of these new LexisNexis Risk Solutions' processes means that Wealthify's customers can sign up and start investing within 10 minutes, fully compliant with AML.