TechnologyMar 10 2022

When to automate advice, and when not to

Supported by
Royal London
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Supported by
Royal London
When to automate advice, and when not to
Credit: Tara Winstead from Pexels

“In a hybrid model, a convenient digital experience lets advisers focus on the life planning, coaching and arguably some of the most tangible parts from a customer perspective,” says Simon Binney, business development director at Wealth Wizards, an advice tech provider.

For example, a client could go through a largely automated triage process and complete forms online, while recommendations are given in an online or face-to-face meeting.

Binney also cites a Wealth Wizards client where hybrid advice technology enabled them to reduce three legacy tools used in the retirement and pensions process to one, as well as suitability and review letters being reduced to three hours.

“This has resulted in a much swifter, smoother process for both client and adviser, with a 100 per cent compliance trail.

“We achieved similar efficiencies with another large wealth management client, where we reduced the total at-retirement process down from 35 to 11 hours. We were also able to reduce suitability report writing, down from six to seven hours to just 40 minutes.”

Striking a balance between tech and human interaction

Digital experiences should be used where they are more convenient, says Binney, whether from an accessibility and time point of view, or something simple such as capturing basic personal details.

“Take providing your address. It is easier to do that online, with a postcode finder or pre-population from your web browser, than giving it verbally. By removing friction and distractions, you can get to the heart of great financial planning quicker and have better conversations from the off.”

Binney adds that clients can access automated and digital systems when it is convenient for them, which is likely to be outside of a typical advice company's business hours.

Intangibles, such as trust and empathy, are difficult to replicate via an automated system.Heather Hopkins, NextWealth

Although there is no shortage of new technology promising to transform how advisers do business, Heather Hopkins, managing director of NextWealth, says the consultancy’s research highlights lack of integration as a stumbling block.

“If systems can’t work seamlessly together, efficiency goes out the window and often more time, not less, is spent trying to carry out basic functions. Advisers who want to use technology to improve efficiency are prioritising systems that can work together, and we believe this trend will only increase.”

Sam Turner, a consultant at Altus, says that another challenge is in pension transfers. “The process of gathering information relating to a customer’s pension assets remains, to a large extent, manual. It can take six weeks to retrieve information from a ceding provider.

“If this can be automated, then we’re looking at significant gains in operational efficiency among advisers, and hopefully a lower overall cost of pension consolidation being passed to the customer.”

But for people with fairly basic financial needs, Hopkins says automated advice appears to be a good value option. “What will be interesting to see is if technology is developed that provides services to those who have more complex financial needs,” she adds.

“Intangibles, such as trust and empathy, are difficult to replicate via an automated system. Tech that flags up issues to the advice team, alerting them to step in is essential, particularly because advice firms are on the hook for any advice they give, automated or not.”

Turner agrees: “Automated advice may well be the future of advice where Isa top-ups for a digitally savvy individual are concerned. But the same individual may benefit from lengthy personal conversations around inheritance planning. Having a proposition that appropriately flexes to meet customer demands will put advisers in good stead.

“From the research we’ve seen, customers largely respond well to digital advice where it is evident that the process has a human underpin. Well-designed automated advice journeys identify natural exit and re-entry points in the journey to ensure customers feel supported.

“We often see automated recommendations validated and then explained to a customer by the adviser. This works well, as it allows for a customer to confirm their understanding and ask any questions about the process, while allowing the adviser to enjoy the administrative efficiency that the automated advice process affords them.”

Bruce Ely-Johnston, chief commercial officer at AdviceBridge, a platform provider, concurs: “There’s no escaping the value of having a human to instil confidence and trust when making difficult and often complicated decisions, but this is all about giving consumers choice as to how they want to receive that advice.”

How businesses are automating advice

One of the “most exciting” outcomes from the development of automated advice is that it can extend the benefits of high-quality advice to new audiences, says Simon Gray, managing director at Hub Financial Solutions.

“It offers a way to make it accessible from mainly the wealthy into the mass market of ‘middle Britain’ clients. In an age of policy measures such as pension freedoms, where the environment is more complex and people are taking on more risk and responsibility for themselves, it is really valuable to be able to offer cost-effective professional support to a wide range of people.”

Last year the advice business launched Destination Retirement, an automated retirement advice service, providing ongoing advice at “modest” cost to those who otherwise would not seek professional help.

Savers input their retirement goals and models run repeated cash flow calculations across a range of asset strategies to deliver the best financial plan.

“It also recognises that clients at some point will want the option of engaging with a human when they feel they need it, perhaps because they have a tricky question, want something explained or just need reassurance,” says Gray.

Verso Wealth Management, an IFA consolidator that launched last year, has also developed fully digital advice as part of its multi-channel approach, which includes face-to-face and remote desk-based advice.

“For the fully digital advice channel, we have automated all stages of the advice process: discover, recommend, implement, monitor and service,” says Miles Joseph, head of transformation and change at Verso.

“As client requirements become more complex, automated advice becomes an enabler for the adviser instead, streamlining their interactions with the client and supporting the adviser with advice solutions.”

As Binney at Wealth Wizards puts it: “The advice industry is incredibly resilient and has gone through several successful transformations. This is just another chapter in that story.”

Chloe Cheung is a features writer at FTAdviser