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Will DIY platforms disrupt the advice sector?

Simon Binney, business development director at Wealth Wizards, an advice technology provider, likewise says the advice landscape is undoubtedly changing.

“[It] will soon look a lot different to how it is now, even within the next year. Adoption of technology is driving this, in particular the accelerating use of hybrid advice offerings, automated and digital-first approaches, which enable companies to deliver cost-effective advice to markets that previously were unprofitable.”

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Indeed Boring Money boss Mackay says it is working with a number of businesses that will bring "bite-sized" advice solutions to market this year.

“It’s important to see digital advice as an alternative, not second best, but also not a direct threat to the financial planning industry,” says Mackay.

“Some people will prefer the relative anonymity or flexibility of a digital service. For others it will be a price-led decision. And some just won’t have the complexity to necessitate a more bespoke, personalised and ongoing service.

“It’s simply horses for courses and evolution, rather than a direct threat.”

Ben Peele, managing director at PortfolioMetrix, draws a comparison with the asset management industry, where passive funds have “cannibalised any expensive closet trackers, leaving space for only cheap passive funds and truly active managers.

“In the same way, Vanguard’s advice offering can be expected to displace expensive but simplified advice offerings. But there will always be clients willing to pay for higher value-add, full advice offerings.”

In its initial disclosure document, Vanguard says its personal financial planning service will not be suitable for an investor who, among other things:

  • Requires holistic financial advice that includes, for example, estate planning, life cover or income protection;
  • Requires financial advice covering the combined finances of you and a partner; or
  • Wants advice that takes into account all available products across the investment market.

Peele says that whether Vanguard’s advice service presents a competitive threat is more of an issue for any adviser who ties their value solely to fund picking.

“The Vanguard proposition offers something comparable at a materially lower price.

“However, for those advisers who have transitioned to focusing on holistic financial planning, they are providing a wide range of value-added services that Vanguard’s offering can’t match, which justifies any additional fees.”

Menasakanian at Altus agrees: “[Vanguard’s] advice is not holistic, nor is it as comprehensive and all recommendations are into Vanguard funds.

“Vanguard has a great range of funds, but some investors may want to invest in stocks and shares, in alternative assets or be more considered about their [environmental, social and governance] preferences.

“These nuances and requirements can only be accommodated through tailored financial advice.”

As such, Menasakanian says that clients who get value from their existing adviser will stay loyal and continue to benefit from holistic planning.