Robo-advice  

Brokers warned of robo-advice threat from lenders

Brokers warned of robo-advice threat from lenders

Brokers have been urged to embrace technology to stave off the threat from lenders using robo-advice to siphon off mortgage borrowers.

Independent mortgage and protection network JLM Mortgage Services has warned lenders are already using technology to capture existing borrowers electronically and push them down an internal robo-advice route.

Rory Joseph, director of JLM Mortgage Services, said intermediaries are complacent about the threat posed by robo-advice, believing direct-to-consumer propositions will not have a significant impact on them.

But while many see robo-advice as a tool favoured by millennials, JLM - which has 43 advisers spread across seven appointed representative firms - said it is far more likely borrowers in their 30s, 40s and above that will be keen to engage electronically.

The network said brokers should develop their own robo-advice proposition that will allow customers to access advice the way they want to and ensure they retain the client in order to lead them through the advice process.

Fully or partially automated advice is becoming increasingly popular with lenders, and NatWest recently launched a robo-advice service for investments costing just £10.

The service recommends how much they should invest, which fund or funds are right for them, and how the individual should use their Isa allowance.

Rory Joseph, director of JLM Mortgage Services, said lenders were starting to use an ‘internal version’ of robo-advice.

He said: “That is where they'll contact existing customers electronically, asking them if they want a new deal, while waiving the early repayment charge in order to secure their business.

“This will appeal to customers who are used to 'consuming' online and don't want to speak to advisers or bank staff and the like. 

“At the pace this is going, this type of activity could well become the norm, with a retention process automated by lenders becoming a dominant force.”

Adrian Kidd, IFA at London-based Radcliffe and Newlands, said he thought many people would be willing to use robo-advice as it is quicker and cheaper than face-to-face advice.

He said: “Robo-advice in investments is definitely happening - there is a big market for it in the States – and there is a lot of complacency around how it will affect intermediaries.

“If you are not embracing or accepting technology is going to disrupt advice, you are slightly behind the curve. That does not mean face-to-face has no place, but a lot of people are capable of doing it by themselves.”

Mr Kidd added that bigger firms would be the ones capable of developing their own robo-advice propositions, while smaller firms may have to focus on providing high-quality face-to-face advice that technology cannot deliver.

simon.allin@ft.com