Advice provided by an automated service is less risky than the traditional face-to-face meetings with a financial adviser, it has been claimed.
But Andrew Firth, chief executive and founder of Wealth Wizards did concede that it faced a greater “systemic” risk.
He said: "My own view is that there is less risk delivering advice using the technique we are using than through traditional advice.
"My own experience of having worked in the regulated advice sector for 15 years is that a lot of situations where unsuitable advice has been given was because an individual adviser went off-piste or the record keeping was not good enough to prove you gave suitable advice.
“Robo-advice keeps a really good audit trail and it never goes off-piste.
“You do have a systemic risk so if you get it wrong you are probably going to get it very wrong and that’s something we have to constantly take into account.”
He said the risk is systemic because robo-advice gives advice to so many people using the same system, so if something goes wrong with that system, it will go wrong for a lot of people.
Mr Firth, who was also the founder of Egg Bank, the UK's first internet bank, which was part of Prudential until being sold to Citigroup in 2007, said robo-advice would take a huge leap forward when it embraces artificial intelligence which would allow the system to learn.
He said Wealth Wizards is currently in the early stages of investing in artificial intelligence.
Mr Firth also cited the incoming open banking rules, which will enable personal customers and small businesses to share their data securely with other banks and with third parties, as a turning point in the provision of robo-advice.
He said: “The biggest barrier to giving someone financial advice is the hour and a half it takes to do a fact find.”
He said 'open banking' could allow fact finds to be carried out in much less time and at a lower cost.
Open banking is an emerging term in financial services that refers to the use of programmes that enable third party developers to build applications and services around the financial institution, as well as greater financial transparency options for account holders.
Daniel Broby, director of the Centre for Financial Regulation and Innovation at the University of Strathclyde, agreed that open banking could have a big impact on financial services.
He said: “We are allowing banks to reach into a bank, pull out the information and do something with it which is innovative.
“That gives us as a country a competitive lead over all other countries.”
damian.fantato@ft.com
