OpinionAug 4 2017

Is the prospect of true robo advice any closer?

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There have been some interesting developments in the world of robo advice in the last few months.

But, as I see it, the era of advisers being replaced by algorithms is still a long way off. 

It's easy to get hung up on robo advice. From the name that means different things to different people, to news stories about artificial intelligence taking over the world, it doesn't take much to imagine a future where ‘Smash’ style robots cackle at the ineptness of humanity as they effortlessly arrange a mortgage in 1.985 seconds. 

And it's an idea that's clearly getting air time. Research last October from Legal & General Mortgage Club showed that 38 per cent of advisers saw the rise of robo advice as the biggest threat to their business in the next three years.

Given recent events, you can see why. The FCA regulated Mortgage Gym is the latest company to enter the robo advice market, promising decisions in 15 minutes. They join the likes of Habito and Trussle in the arena. 

Used effectively, it can help to educate customers, streamline and reduce the time to complete the application process.

On top of that, only a few weeks ago, the FCA's director of strategy and competition expressed concern about a lack of clarity and transparency in fees, and intimated that greater use of robo advice could help ease the situation. 

And the FCA is also planning to extend its robo advice unit to include firms developing guidance solutions. 

But before we all take to the hills, consider this. 

* Firstly, robo advice in one form or another has been around for years in the mortgage market – it just didn’t have a label!

* Secondly, mortgages are sufficiently complex and not taken out annually which means that technology on its own is unlikely to be sufficient – the so called robo advisers actually provide personal advice for the vast majority of transactions. 

*Thirdly, and most importantly, advisers can offer something that robo advice will never be able to replicate: the human touch. Call it experience, empathy, knowledge or just being good at your job, advisers will always win out over algorithms.

That's not to say that advisers should ignore robo advice as technology will help to educate customers and make the process of getting a mortgage more efficient. It will undoubtedly have an effect on our industry and advisers need to respond accordingly, but robo advice should be viewed as a silver bullet.