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Will DIY platforms disrupt the advice sector?

Will DIY platforms disrupt the advice sector?
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When you think of an investment platform, managing clients’ investments online or DIY investors are probably what come to mind.

But platform providers have begun stepping into the advice space in a bid to address the advice gap.

Just one in 14 people paid for advice in the past two years, a survey for OpenMoney found.

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“Digital advice services are filling what has historically been a huge void between DIY investing and ‘full fat’ advice,” says Anna Stoughton, relationship manager at Boring Money.

Last year, as reported by FTAdviser, seven digital advice businesses came together and launched a campaign to tackle the growing advice gap. The group, called the Digital Advice Group, is chaired by Boring Money's chief executive Holly Mackay and aims to promote the benefits of financial advice and alternatives to traditional, face-to-face models.

“Five to 10 years ago, consumers were faced with an all or nothing choice between picking funds on a direct-to-consumer platform, or sitting down to speak to an adviser face-to-face. Thankfully, there is now a much broader spectrum of options to choose from,” says Stoughton. 

Bestinvest, for example, has introduced one-off, fixed-price advice options as part of its "reinvention" of online investing, with client meetings taking place over a video call or by telephone.

The platform’s goal-based investment advice (at £295) recommends a ready-made portfolio, or asset allocation if the investor wants to make their own fund selections.

Meanwhile, an investment adviser can examine a saver’s investments and make recommendations in a portfolio health check at £495.

It follows the April launch of Vanguard’s advice service for retirement savers, at an all-in cost of 0.79 per cent for investors with at least £50,000 saved on the personal investor platform.

Service levels increase with the amount invested. Clients with more than £100,000, for example, have access to telephone or video-based financial planning support, while clients with more than £750,000 are supported by a dedicated financial planner.

M&G Wealth also launched a hybrid advice business as part of its existing customer base in late 2021, initially targeting pre and post-retirees in the decumulation phase, with a wider launch to an external customer base expected later this year.

Clients, often with modest wealth and simpler financial needs, will be able to access advice they currently find difficult to obtain due to cost or the impracticalities for an advice business to serve smaller investors, according to M&G.

2022: the year of the digital adviser?

Janine Menasakanian, investments consulting director at Altus, says there will undoubtedly be other digital advice service launches.

“In the investment platform space, there is recognition that ‘fund buy lists’ and ‘how to guides’ are just not sufficient anymore. They only go so far, [and] in any case consumer confidence in these fund lists has somewhat diminished after Woodford-gate.

“Therefore offering either guidance or some form of digital advice seems like the next best step in the platform space, and those with focus on at-retirement planning and pension consolidation will be the winners, because that is where consumers need most help.”