A new adviser starting out in 2018 might be shocked to hear how much the profession has changed over the past five years. Since 2013, there has been the retail distribution review, Mifid II, the pension freedoms, numerous market studies, the introduction of open banking and the move towards a pension dashboard.
This wave of change has not broken. We are merely at a crest that is continuing to move the wave forward. And it is being driven by technology, just as much as by regulatory change.
In the near term, the effect of technological advances has not been as stark as people expected. Demand for face-to-face advice continues to surge but is being met by short supply.
This does not mean as a profession we should ignore the power and potential of technology in financial advice. I believe a hybrid of the two could be the answer.
Finding an equilibrium
Policymakers have begun considering how to wield this power to deliver a better outcome for the nation’s savers.
In its recent report on the pension freedoms, the work and pensions committee highlighted the reforms have led to advice being more important than ever before. The committee’s investigation found cost was a significant reason for the advice gap, and automated models would be significantly cheaper.
Although such a service would be markedly different from full face-to-face advice, the committee concluded: ‘Financial advice will not be for everyone, particularly those with the smallest pots.’ But, it pointed out, these people would benefit from automated advice.
However, there is a public doubt around the idea of automated advice. Research company Platform’s latest consumer study reveals only 18% of European investors are open to using pure robo-advice. However, this number almost triples when some sort of human advice is also available.
Recognising this doubt, the work and pensions committee has recommended the regulator carries out a review comparing automated and face-to-face advice.
The hope is this review identifies the sweet spot for those who are suited and comfortable with automated services, and those that need the personal element offered by face-to-face advice.
But I firmly believe there will be a need for both. A hybrid model will be the key to giving people the 24/7 access they get from other professions, along with the relationship and intimacy required from advice.
This type of model already exists in other professions. For instance, the National Health Service is looking to add its own ‘GP at hand’ video appointments service via mobile phones. The service aims to offer the same face-to-face security of speaking to a qualified practitioner, but with the convenience of mobile. A similar model could be used for financial advice supported by online services.
As advisers reshape their process they will be able to use digital strategies to see more clients, more profitably. But this will require some rethinking of traditional models.
Technology allows for easier and more frequent client interactions. Some clients may prefer this to annual reviews, but everyone is different and will value different experiences. So advisers will need to consider what process works for their clients.
By embracing a hybrid model and the significant opportunities it provides, advisers can create even better outcomes for more customers.