CPDJan 3 2017

What the future of advice might look like

  • To understand the background to development of robo-advice.
  • To learn how a hybrid approach has worked in the US.
  • To gain an understanding of how hybrid advice can work in UK firms.
  • To understand the background to development of robo-advice.
  • To learn how a hybrid approach has worked in the US.
  • To gain an understanding of how hybrid advice can work in UK firms.
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What the future of advice might look like

1) A growing realisation that wealthy clients often start small and firms are increasingly unable to grow their clients from scratch as they once did. 

2) That once that wealth is inherited it is increasingly unlikely that the firm will have a relationship with the younger heirs and the result is they may lose the business income stream. 

Customer search for value in a digital world

Over the past five years there has been a shift in customer service expectations as digital has exploded.

According to a recent survey by Roubhini ThoughtLab of 2,000 investors worldwide including from the UK, the number one shift in behaviour that investors are expecting over the next five years is the use of anytime, anywhere, any-device access to advice.

It outstrips demand for asset consolidation, the search for better investment performance or indeed fee reductions. 

The survey also showed that when customers are selecting an investment adviser the criteria that are important to them are first, the quality of service and second fees and pricing. Investors told Rhoubini that this second factor, the search for value, is expected to become even more important over the next 5 years.

Think about the impact of both these trends on margins in a heavily manual investment advice business.

One immediate impact is the huge shift to low cost, passive investing as advisers look to manage total costs. According to the Investment Association the value of passive funds under management in the UK has quadrupled in the past 10 years to almost £100bn.

Allied to this focus on value is the increasing dominance of risk based investing. We all know how important risk profiling is as part of delivering a suitable recommendation but what is also happening is that customers are becoming much more risk aware.

The Roubhini research shows the number 1 factor for delivering investor trust is; “the delivery of ‘good returns’ geared to my risk tolerance”. As a result we have seen the growth in outcome and allocation funds where according to the IA, net retail sales have more than doubled in the last decade. 

How far can automation take us?

So if operating a manual investment advice business in a digital world is increasingly challenging, how far can the automation take us? 

The use of artificial intelligence or machine learning where machines can self-learn without having to have all their instructions pre-coded is clearly now reaching into the public consciousness.

The speed of IBM’s Watson, an artificial intelligence capability which can answer questions posed in natural language is astonishing.

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