Will tech change advice?

Will tech change advice?

Technology has permanently reshaped so many industries. 

In 2019, Amazon surpassed Walmart to become the world’s biggest retailer. Alphabet is by far the largest media company by advertising revenue. Facebook has changed the way we consume news. Uber and Lyft have altered the transport industry, while Tesla’s market cap is greater than that of BMW. 

Hargreaves Lansdown, an online direct-to-consumer platform, is now bigger than Schroders, and Airbnb’s potential initial price offering value may make it larger than any hotel chain. The speed and magnitude of these changes is quite remarkable. 

The message is clear: technology, big data and artificial intelligence will eat all of our lunch, eventually. But will it? Could robo-advice make face-to-face advice redundant?


One strong argument for using a robo-adviser is the role that markets have to play going forward. 

If, as seems to be the consensus, we end up with prolonged low market returns, an advice fee of 0.75 per cent may well prove too costly when real returns from investment markets are in the single digits. 

Digital advice might be one way out of this – which we shall return to further on.

It also seems most advisers find that the cost outweighs the benefit of delivering face-to-face advice to the millions of smaller clients in the market (the so-called advice gap).  

There is also the profitability motive, more broadly. 

If advice could be dispensed quickly and cheaply in a way that is highly scaled, automated financial advice should be pursued purely for self-interest. Perhaps robo is the future, then.

Yet, in practice we find penetration rates are both low and slow, unlike other industries where technology has dominated quickly. 

The Financial Conduct Authority’s Financial Advice Market Review baseline report (albeit from 2017), suggested that robo had penetrated less than 1 per cent of the retail market. 

Nutmeg, considered a leader in this space, showed in their latest publicly available financials (as at December 2017) that since launching in 2013, they only surpassed £1bn in 2017. 

Nutmeg also claim they are the most recognised online investment brand in London. But in spite of their significant brand power, clients have been slow to move.  

Prominent US robo-advice brands like Betterment and Wealthfront (both founded in 2008) have around £15bn and £10bn respectively, which seems small to us.

As Schiff and Taylor assert in their 2016 McKinsey report (Key trends in digital wealth management – and what to do about them), the “client uptake of digital advice offerings is slow.” Why is this?

The World Economic Forum 2018 Future of Jobs Report estimated that by 2022, machines will do more than 60 per cent of administration work and 60 per cent of information and data processing.