In the same way that technology has changed how we eat, how we manage our health and how we travel, it is finally starting to change how consumers get financial advice.
This evolution has always divided opinion. Some traditional advisers have fought to own the exclusive right to use the words ‘financial advice’. When the earliest robo-advisers launched, some were furious that these brands had the temerity to touch the word ‘advice’.
Although the ‘advice’ in the earliest robo models was pretty light on detail, things have been refined and improved and we have a new and more sophisticated cousin in town: digital advice.
I think it sits on a spectrum of financial help, from newspapers, the Money Advice Service, consumer websites like Boring Money, DIY investing platforms and robo-advisers on the one side, and traditional advice on the other.
Digital advice will not single-handedly solve the advice gap. But it will certainly make things better, more convenient and more accessible for millions of consumers.
To be precise, we estimate it will help 7.1m people access some advice.
Who are they?
The 7.1m are made up of those savers and investors who are typically lacking in confidence, have sufficient means to save and/or invest at least small sums each month, and who are comfortable with some element of the advice being digital.
Some will be people that migrate away from existing advice. We think that the group of advised customers representing the biggest flight risk are the under 55s – those still in accumulation with relatively straightforward needs.
Our research sizes the potential uptake of digital advice from those currently seeing a traditional adviser at just under 1m customers. If we segment this by age and life stage, the breakdown is 400,000 advised investors currently in the accumulation phase, a further 200,000 approaching retirement and 300,000 who are already retired.
These migrants from traditional advice are a relatively small part of the potential uptake, however. We estimate the majority of digital advice users will come from today’s DIY investors.
There are 4.4m DIY investors who would be interested in the comfort, advice and validation offered by digital advice, were they aware that it existed as an option.
Finally, there are almost 2m cash savers today who feel too scared to make a move unassisted, but have enough money to invest and are increasingly fed up with low interest rates and pathetic cash accounts.
Why will digital advice appeal to people?
Cost is clearly likely to be a draw for some people. Our Advice Report 2021 looked at whether investors were willing to pay more for the face-to-face experience. Almost two-thirds of younger investors said they would favour digital at a lower cost, and a sizeable minority of older investors are also interested in digital advice if it saves them money.