Robo-advice: The hybrid era
- Learn about the current digital advice market
- Gain and understanding of industry developments
- Learn about the relationship between digital advice and human advice
- Learn about the current digital advice market
- Gain and understanding of industry developments
- Learn about the relationship between digital advice and human advice
The 21st century has brought with it an increasingly ambivalent attitude to technological progress. These improvements – whatever their form – typically generate a buzz of excitement from those now used on a never-ending supply of new devices, digital developments and online evolution.
Set against this is the growing concern that the emergence of artificial intelligence could make whole industries redundant. Low-skilled, easily automated jobs were first in line, but the past decade has brought with it a growing belief that more technical professions could also become obsolete. So the robo-advice era inevitably brought with it concerns from financial advisers.
The debate is now about how advice firms and new entrants can use technology with advisers in a hybrid to give the best of both worlds.Ben GossHalf a decade on from the launch of UK pioneer Nutmeg, the picture is more refined. Far from being concerned, many firms are seeking to integrate concepts into their businesses. By the same token, some robos have acknowledged the need for face-to-face advice in certain circumstances.
To use 1980s film analogies, robo-advice’s role is now viewed as a RoboCop that can complement existing structures, rather than a Terminator seeking to change the future.
“The debate has matured over the past 18 months,” says Ben Goss, founder and chief executive at Distribution Technology, a provider of financial planning and practice management technology for advisers.
“You’ve seen it move from polar opposites, which I get, but isn’t an idea in any way grounded in reality, to one that’s much more nuanced, about how advice firms and new entrants can use technology with advisers in a hybrid to give the best of both worlds.”
Standalone struggles
Comparisons with other nations suggest the UK digital advice market, despite starting to gain traction, is still small fry.
According to research from Burnmark, published in April, more than 200 robo-advice firms operate in the US, compared to just 20 here. That does not imply an easier route to success in the UK: the report suggests the future for those offering digital advice without the backing of a well-resourced parent is somewhat bleak.
Burnmark’s research concludes that “based on their fee structure, it is unlikely that many of these firms can achieve profitability on a standalone basis”.
It goes on to report that “one of the leading UK robo-advisers receives revenues of $184 (£141) per customer, but the cost of acquisition through digital marketing campaigns alone is $225 per customer”.
