David Tiller, Head of Adviser and Wealth Manager Propositions at Standard Life, discusses the relationship between financial advice and technology and gives his predictions on how this might develop further in the future.
David Tiller, Head of Adviser and Wealth Manager Propositions at Standard Life, discusses the relationship between financial advice and technology and gives his predictions on how this might develop further in the future.
Advisers are price setters today
It's easy to see why some may be complacent about the status quo. Demand is high thanks to pension freedoms, and there's a healthy pipeline of future client assets to come from auto-enrolment and the DB market.
But what about tomorrow?
There are powerful socio-economic and technological forces shaping change, and government policy demands increased capacity for more accessible (i.e. cheaper) advice. Such forces will put pressure on existing advice models and will inevitably open the door for robo-propositions.
Ironically, the technology that's often touted as a "threat" to advice could be the thing that ensures it remains sustainable into the future.
The continuum from robo-propositions to full service advice
Three core models are emerging:
- The pure robo-adviser. This can be viewed as ‘next generation’ direct sales with similar commercial forces applying. Brand awareness and acquisition costs are likely to determine success. Unlikely to be profitable in its own right, the most important consideration for advisers is to understand how it complements/enhances profitable advice propositions.
- The remote adviser model. A natural extension of face-to-face advice, allowing value added solutions at a low cost to serve. There's a real adviser involved, but technology picks up the strain.
- The digitally enhanced adviser. Full service, face-to-face advice, offering complex solutions and ongoing management. This is the most individual, relationship-based type of advice but technology still plays a key role. This model depends on sophisticated automated processes that can be configured to reflect individual client requirements whilst minimising unnecessary manual intervention.
These models require investment in integrated technology or sourcing a white label option from a platform partner.
So, is technology a threat or a saviour when it comes to financial advice? I believe in the short-term, advisers may be able to continue without embracing technology, and they’ll probably be successful for a while. However, to be sustainable long term, all the evidence suggests technology will be a critical factor in meeting client demand into the future.
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The views expressed in this article should not be regarded as financial advice.
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