EV’s report ‘Hybrid and Digital Advice: Driving Transformational Change, at Last!’, published today (April 25), claims there are “clear opportunities” for advice firms to use digital and hybrid advice as a part of their propositions.
According to the financial planning software provider, digital and hybrid advice makes it simpler and more cost-effective to advise clients, while also giving clients another advice route which fills the gap between guidance and traditional advice.
EV suggests digital advice journeys can cater to a different sort of clients with lower assets than those who would normally take traditional advice.
Its model (shown above) suggests guidance is the first form of help clients can receive. EV said about this stage: “Consumers can discover information (‘facts’) about investments and financial planning and, by modelling alternatives, set realistic ‘objectives’ for their financial plans.”
The next stage is digital advice which provides a recommendation together with an advice explanation in the form of a suitability report.
“Algorithms generate the advice, and there is no planned intervention or support provided by advisers. This model currently only works for simple advice on, for example, Isas and general investment accounts,” the report stated.
Most of the development activity is focused on hybrid and digital advice as a separate channelChet Velani, EV
In a hybrid advice process, the next stage, individuals start by using a digital process, for example, completing the initial fact find and straightforward questionnaires, before being passed to a financial adviser to complete the process.
EV said: “Greater automation of the process is then possible depending on the advice required, with the production of the suitability report driven by built-in algorithms. Essentially the advice becomes increasingly digitally driven.”
The final stage is full traditional advice where advisers provide recommendations to clients on their finances.
But EV pointed out that traditional advice is expensive to deliver, owing to ever-increasing regulations, insurance requirements and the cost of time required to be spent serving the client.
“The deployment of technology and algorithms can shoulder some of the burdens and reduce adviser input, substantially reducing the cost of giving advice,” it suggested.
Cost reductions
Savings of about 50 per cent of an adviser’s time can be achieved through a transition from a digital process to adviser-delivered advice, according to EV.
By having more of the advice process digitised, the amount of time advisers spend on administrative activities will reduce, such as dealing with simple advice cases and the production of suitability reports.
