A spate of advisers due to retire soon could boost the robo-advice sector unless the industry plugs the advice gap, warns the chief executive of Octopus Investments.
Ruth Handcock says: “There will be quite a number of financial advisers retiring in the coming years. My hypothesis is that there are more people leaving the sector than entering the sector.”
She adds: “You may see a widespread adoption of robo or some version of robo that includes some financial guidance.”
But she stresses that, while robo-advice will fill the gap for “self-directed people”, there will always be clients with more complex needs.
“My personal opinion is that financial advice is as much about emotion as calculation.”
She says that, despite the robo-advice sector attracting £1.4bn of investment in recent years, customers have not really embraced it.
Octopus Investments has said a report it is due to publish will reveal several thousand advisers are set to retire in the next five years.
The Heath Report Three published in January this year revealed that 7,000 advisers could retire in the next five years.
Ms Handcock says: “There are about 25,000 independent financial advisers. You do not see many people coming into the industry as [are needed] to be able to fill that gap, so the current firms need to become more efficient or you need to find a way of getting people to the sector.”
Or else robo-advice will need to become more common, she says.
Ms Handcock who took over as chief executive in February this year joined from Tandem Bank, a challenger bank.
“Technology is an area we have particularly invested in over the last few years. We make sure we are learning from the fintech community in London and building interesting products and services that help financial advisers deliver better products,” she says.
Most of the retail products built by the company are sold through the 4,000 financial advisers the firms work with.
Ms Handcock runs the company’s retail team, which creates and delivers financial products via financial advisers to end investors.
She joined because she wanted to be somewhere where she felt like she could“still make change happen quickly anddisrupt things”.
Ms Handcock says that much of her job at Tandem revolved around using technology alone to close that advice gap.
Her five-year plan at Octopus Investments is also intended to solve the advice gap in the market using technology.
“Unless you are building best in class technology then you are not going to win in the long term.
She confirms: “My five-year plan revolves around how we can use technology to build outcomes for customers in a way that is learning from the fintechs rather than traditional bits of the financial advice industry, which have traditionally struggled to keep up with technology.”
Ms Handcock adds that the main challenge in her role as chief executive is “figuring out how to find more hours in the day”.