When the launches came thick and fast in the middle of the past decade it seemed the future of advice/guidance had arrived, with Nutmeg being joined by a raft of new market entrants, while several high street banks also prepared their own online propositions.
Algorithm-based investment and advice propositions were seen as a way of bridging the advice gap, and the regulator devoted resources to encouraging their development through programmes such as Project Innovate.
With client acquisition costs high and assets under management growth slow, some robo-advice providers were struggling, and by the end of the decade the launches had stopped coming, banks had developed cold feet and several providers disappeared from the market.
In the meantime, the advice gap has shown few signs of narrowing. Fewer than one in six people are taking paid-for financial advice, OpenMoney estimates, while the proportion of people seeking advice fell to one in 14 last year from one in 10 in 2020.
But while the original hopes around algorithm-based financial advice may have faded, technology remains the key to opening the financial advice door to more people.
Mix and match
While digitally delivered financial advice may not have taken off as expected, the past decade has taught us much about what works and what does not. We know now that while technology has a vital role to play, it is alongside traditional methods rather than as a replacement for them.
The market is moving increasingly towards a hybrid model that combines digital tools and processes with human interaction. The digital advice technologies needed in order to increase the accessibility and affordability of financial advice are now here, offering a way to deliver low-cost, quality service at the scale needed to begin bridging the gap.
Robo-advice technology is just a small part of the universe of digital capabilities available to advisers, with automated processes allowing companies to cut costs and spend more time on active client work
Meanwhile, the market for accessing financial advice via digital means has opened up as a result of the Covid-19 pandemic, during which technology such as videoconferencing enabled millions to continue working, connecting and transacting. For instance, the usage of banking apps soared 72 per cent in Europe during the early part of the pandemic.
Robo-advice technology is just a small part of the universe of digital capabilities available to advisers, with automated processes allowing companies to cut costs and spend more time on active client work.
