For some, receiving financial advice when investing money is crucial, and digital technology underpins a new generation of advisers serving up automated investment management, or robo advice.
Designed to deliver universal access to good financial advice, the government’s 2012 Retail Distribution Review (RDR) had the polar opposite effect, leaving millions in an ‘advice gap’.
Following on from the work of RDR, the government launched its Financial Advice Market Review (FAMR) in August 2015 to examine how financial advice could work better for consumers.
The aim of the review was to explore ways in which government, industry and regulators can take individual and collective steps to stimulate the development of a market to deliver affordable and accessible financial advice and guidance to everyone.
FAMR published its final report on 14 March 2016 with its main recommendations aimed at:
- providing affordable advice to consumers
- increasing the access to advice
- addressing industry concerns relating to future liabilities and redress, without watering down levels of consumer protection.
Big business in the States, automated, or robo-advice, is set to boom in the UK with a number of recent launches and many more in development.
The FCA is to encourage ‘online automated advice models that have the ability to deliver advice in a more cost-efficient way’ and thereby revolutionise mass market savings and investment.
Online advice can be quicker, cheaper and accessible; those less confident about DIY investing may eschew traditional advice for a platform that delivers a ready-made investment portfolio.
Quick – robo advisors are designed to make investing as easy as possible; automated advice platforms are based on efficiency, aiming to deliver high quality financial advice in the least time possible.
Simple – robo advisors make maximum use of technology to make things as simple as possible. Online technology is the enabler for the new raft of investment platforms with everything available via a laptop or smart phone.
Transparent – cost is an important factor in the successful outcome of any investment strategy; robo advisors tend to have simple and transparent fee structures.
Traditional advisers may provide a more bespoke service, with complex pricing; a robo advisor aims to provide a straight forward service with a straight forward cost.
Accessible – robo advisors have no high minimum investment requirements; a low cost, online business model means lower minimum investment amounts for clients, providing access to the many millions precluded from financial advice.
Engaging – robo-advice web sites are attractive, simple and engaging; an online account with an up to date valuation of your portfolio is always available.
Human – in contrast to the ‘robo’ moniker, most providers will have advisers on hand to speak to clients directly when required to deliver reassurance or guidance.
Human interaction can be by telephone or webchat so the client experience is unlikely to be purely online; platforms provide as much or as little direct contact as is required because even robo-advised investors are individuals.
Compare robo advisers here