Robo-advice firms offering automated financial advice have begun incorporating human advisers into their service, raising questions about how this will impact their business models.
Schroders-backed Nutmeg is currently looking at introducing human advisers into its service, while rival Scalable Capital, in which Blackrock has a large minority stake, has recently done just that.
But this shift away from automation has raised questions about how a human-supported or hybrid service can be reverse engineered into a low-cost online system that is the central feature of robo-advisers.
Shane Williams, the co-head of UBS SmartWealth, said many robos had skipped advice and built what was effectively an execution-only product.
But he said now such firms are beginning to realise clients also want advice.
"This means either rebuilding their products from the ground up or taking the easy – but expensive – route of offering traditional advice sessions.
"Many are choosing the latter.
"This presents a problem around long-term viability of robo business models. If costs rise and businesses fail, the retrospective addition of financial advice might end up costing everyone," he said.
Michelle Pearce, chief investment office at Wealthify - which does not offer advice, agreed: "There’s a lot of confusion with the term ‘advice’. Many people take it to mean customers want the full fat advice, but it doesn’t have to be that at all.
"A skimmed version can work very effectively and, we believe, be integrated into a digital proposition relatively well, in a scalable manner.
"But the full fat advice route is a different ball game. We’ve not seen anyone in the UK effectively integrate holistic financial advice into their robo in a solely digital way. This means human advisers need to be relied on which is expensive and defies the scalable and cost-effective principle that robos live by."
In 2016 the Financial Conduct Authority launched its advice unit which aims to help firms develop automated advice models.
The first cohort included 10 firms - of which five were banks - with Evestor and Moneyfarm the only big name robo-advisers to have taken part in the programme.
One of the robo-advisers to have integrated advice into its service - Scalable Capital - has done so with human advisers. The other - Nutmeg - is still "exploring" its model.
Simon Miller, co-founder of Scalable Capital, said: "The process remains well aligned to our scalability; we can automate large parts of the advice process and the advice we offered is transactional in that we do not then offer ongoing advice.
"If clients go on to become clients of our investment service then they become part of our discretionary investment management service which is entirely automated and ensures that their portfolio is managed in line with their risk tolerance."
Meanwhile Shaun Port, chief investment officer of Nutmeg, said: "We are currently exploring a model where we could combine the best elements of digital wealth management and more traditional financial advice.