Robo-advice, as an undefined term, lends itself to the strategy of a group of investment providers who want to appear that they offer advice, but in reality, offer nothing more than a generic questionnaire.
This narrative has been a helpful marketing tool to justify charging fees that are over the odds.
The Oxford Dictionary’s recent definition has done little to alleviate this problem and close the growing gap in the provision of financial advice.
The definition is: “Robo-advice: An online application that provides automated financial guidance and services.”
Labelling the term with “guidance” offers a get out of jail card for providers that don’t offer personalised advice to brand themselves as robo-advisers, and continue to operate under an illusion of providing proper regulated financial advice.
The fees investors pay for financial advice are often shrouded in so much jargon and misleading information that it’s questionable whether many of them really understand what they’re paying for.
A clearer distinction needs to be made to set those that are offering proper regulated advice apart from those that are not.
There’s a trend emerging whereby these services are moving from offering advice to guidance and it begs the question why.Just as robo-advice emerges to offer an affordable service to those previously priced out, proper advice is slipping away under a label of guidance, further misleading savers and sucking them into unsuitable financial products.
This follows the former chancellor George Osborne launching a consultation into the government’s guidance provision, creating the Single Financial Guidance Body.
This promises to offer consumers a holistic approach to their finances, grouping together Money Advice Service, The Pensions Advisory Service and Pension Wise into a single body.
However, there’s a trend emerging whereby these services are moving from offering advice to guidance, and it begs the question why, and how much can consumers really rely on this? Guidance is a loose term and doesn’t reveal much about what the customer is getting, weaving an increasingly more enigmatic web for consumers.
Tailored, personalised advice is still required for many who need a more robust view of how they should be managing their finances as a whole. The FCA recently exposed that over half of people transferring from final salary pensions were being wrongly advised.
Add this to the finding, published by the International Longevity Centre and Royal London, that those who receive financial advice are on average £40,000 better off than those who don’t 1 , and this should be an eye opener to the consequences of not receiving proper regulated advice.
Clear and accurate detail is fundamental to the provision of financial advice, and the words ‘advice’ and ‘guidance’ should not be confused or used interchangeably.
Correctly labelling investment providers is a crucial way of creating transparency on what type of support they offer – “guidance” does nothing to clear this murky grey area.
Anthony Morrow, cofounder of evestor.co.uk
