Though robo-advice in the UK is a booming business with start-ups and industry stalwarts alike rushing to capitalise on a new opportunity, Moss fears that the line between advice and guidance remains somewhat blurred.
Findings from a new whitepaper published by EValue, shared during its roundtable event chaired by Nationwide, revealed that most consumers do not differentiate between guidance and advice.
“The FCA states that if a consumer feels they’ve received advice then it can be deemed as such, so there is clearly a pressing need for the financial world to respond,” Moss indicated. “This is particularly urgent today as the majority of UK robo solutions offer guidance rather than regulated advice. And yet, in a post-pension freedoms, auto-enrolment world, there has never been more need for consumers to have access to robust financial advice to assist them in making informed financial decisions,” he argued.
Delegates from EValue's event, including Lloyds Banking Group, PwC, Aegon, KPMG and Ernst & Young, all agreed that robo propositions will become a core competency for financial institutions. As such, they argued providers of robo advice will need to invest in better risk analysis, be able to test capacity for loss and take into account a more wholesale picture of a consumer’s financial portfolio.
Personalisation of robo-advice, which delegates said will be key to enhancing consumer engagement, was also identified as an area where the nascent industry’s technology is currently lagging behind.
But for the time being, there are still solutions for customers and cautious financial institutions in the form of cyborg or hybrid advice, in which all robo-generated recommendations are checked.
As head of digital advice at Nationwide Chris Williams stressed: “Robo-advice is not about replacing advisers; instead we expect very soon to see a wholesale shift in the way consumers interact with the financial institutions they rely on.
“By trialling robo we are putting our customer needs first and ensuring we match their demand for advice with cross-channel consistency – whether automated, hybrid or full face-to-face,” he explained.
And the stakes to adopt this regulatory robust, 'true robo-advice' are high given the cost cutting implications of this streamlined way of meeting customer needs.
“If institutions can take the step in adopting true robo-advice,” said Moss, “then the behavioural finance and gamification techniques that can be applied in the advice process could boost engagement in a way that has never before been experienced by the financial services industry.”