Long Read  

How the pandemic has proved robo-advice will not take over

How the pandemic has proved robo-advice will not take over
Brett Jordan/Unsplash

Over the course of the pandemic years some industry commentators and experts believed that robo-advice offerings would supersede traditional human interactions.

However, it seems most businesses with robo-advice arms are accepting that a hybrid approach of blending the traditional with technology is more consumer friendly at present.

Liz Field, chief executive at trade body Pimfa, said recently that more digitalisation was expected in the advice sector, through hybrid business applications, not overarching robo-advice models.

In November last year technology chiefs at Schroders Personal Wealth and Saunderson House said robo-advice had not taken over and would not in the future. In December, technology adoption was reported as “alarmingly poor”.

In August last year, Lloyds Bank announced the acquisition of Embark Group for £390m with the aim of targeting the top-three spot in the robo-advice market.

Toby Larkman, chief commercial officer at Embark Platform, says: “The latest iteration of our Embark Investor Confidence Barometer found that more than half of advised investors would be comfortable in paying for robo-advice, either with an option to speak to someone or without.

“Perhaps unsurprisingly, it found that the youngest age brackets – 35 to 44 – were the most comfortable with robo-advice. For individuals without an adviser, comfort levels for robo-advice without the input of a person were significantly lower.”

He admits, however, that those who access financial advice would “be more comfortable” with advice solutions in general.

Mr Larkman adds: “These findings show that clients want to hear about their adviser’s digital developments, and how they can benefit from them. Over time we expect robo-advice will become a complement to existing advice solutions and models.

“We anticipate that take-up will be strong among individuals who are confident in their ability to manage their finances and are at the start of their financial planning journey.”

Mike Barrett, consulting director at The Lang Cat, says that what constitutes a robo-advice service is always up for debate, and echoed those comments about younger users that are more technology aware.

“In the direct-to-consumer sector most platforms have posted significant growth, both in assets under administration terms and also the use of their digital services."

He says the major players such as Hargreaves Lansdown and AJ Bell had reported a downward shift in their average customer age profile, indicating they are attracting younger, more digitally savvy investors.

Short-term fixes, long-term impact

Barrett says: “In the advised sector, while advisers still prefer face-to-face contact with clients, the demands of the pandemic have forced every firm to adopt digital onboarding and reporting processes, often via a client portal.

“While many of these processes were short-term fixes to allow some sense of business as usual during lockdown, we are seeing evidence that, for many advice firms, digital communications with their customers will become the norm, especially for post-sale servicing or client reviews.”

Barrett’s attitude towards the adoption of a hybrid way of working is aligned with Larkman's; an admission that advice will not go fully robo.