"Out of adversity comes opportunity," Benjamin Franklin once observed. The Retail Distribution Review changed the advice landscape beyond recognition, with many advisers opting to leave the market, but the long-term result has been a rise in innovation and fresh thinking. Agile fintech and technology start-ups have been racing to develop automated advice solutions able to deliver affordable and regulated advice to those previously not served by the traditional market.
Over the past decade or so, we have seen the steady growth of automated advice but the big question now is - what will happen next? What can we expect to see in the next five or even 10 years? Based on our experience of the past decade, the following scenarios may well be on the cards:
There is no doubt the adviser of the future will be able to see more clients and spend more time client-facing as a result of automated advice support. From paraplanning through to generating complex advice plans, the hybrid advice model will deliver efficiencies through the automation of repetitive admin tasks and report writing.
The adviser is freed from the heavy lifting to spend more time with the client to better understand their needs. In this way, competitive advantage for advice firms will depend on the adviser-client interaction and empathy, as much as the superior quality of the advice itself.
As a recent report by Loughborough University on the impact of robo-advice on advisers concluded: "Wealth management firms need to think strategically about how they wish to design the service encounter with their clients. With the emergence of new powerful technologies such as artificial intelligence and robotics, managers need to decide on the balance between human and technological inputs."
The automated adviser
We are only just imagining the capabilities and power of what artificial intelligence (AI) can bring to financial advice. What we do know is that it will become integral to advice and will augment the human advisers it is designed to support.
New facial recognition, voice and tone monitoring tools will, for example, be able to work out a customer's needs and attitudes to risk. The AI will listen to the client's answers and then populate a fact-find together with a ‘sentiment analysis'. This will be an indispensable asset for those clients unaware of their own appetite for risk and will provide even the most experienced of advisers with an essential back-stop.
Advice will no longer be static and will evolve on a continual basis thanks to sophisticated algorithms that will process open-data feeds from a myriad of sources. Imagine a constantly monitored, holistic journey covering everything from financial priority planning, pensions, savings, consolidation, mortgages, protection, defined benefit transfers, retirement income and tax planning, equity release and more.
The adviser will be able to review goals, circumstances and external forces and adjust advice accordingly thanks to automation. Deloitte's The future of automated financial advice in the UK also predicts this ongoing monitoring will become commonplace. "In five to 10 years, we will probably not use the term ‘robo-advice' - digital will just be another channel," it suggests. "The provision of advice will be ‘omni-channel', although it will be underpinned by a consistent underlying engine."
A recent study of 1,200 UK consumers by Crealogix found younger generational groups, in particular millennials, are substantially more open to automated financial advice and investment management when compared to more mature age groups.
While millennials and Generation Z will demand automated advice, however, there will still be the Generations X and Y and the baby-boomers who may prefer the human touch. The beauty of augmented advice in the next five to 10 years is that it will cater to everyone - and will be able to process thousands more clients in a bid to end the ‘advice gap' from the previous decade.
Solutions will need to be fast, highly competitive and able to provide advanced valuation of customers while anticipating their ongoing needs. This is only achievable with automated advice designed to serve everyone from 20 to 90-plus, whatever life stage they are at.
The advice business
There is no doubt firms will devise new internal business models as a result of disruption caused by automation. Every traditional role in an advice business could be enhanced - paraplanners, administrators, financial teams, management and the advisers themselves.
Imagine a future where technology and automation drive overall profitability as a result of new charging frameworks, new efficient processes and demand from significantly more clients. Technology could change the way the firm operates - whether providing support tools for advisers or branching into self-access digital direct proposition, it means the firm is able to deliver more options to suit the needs and wants of a greater number of customers.
Of course, no-one has the luxury of a crystal ball - where would the fun be? As we make these predictions for 2029, however, it is helpful to cast an eye back to 2009 when Wealth Wizards was founded. As a pioneer of expert online regulated financial advice in the UK, one thing has always been at the heart of what we do - quality advice needs to be ethical and delivered by businesses with the right qualifications and professional standards.
While it might be tempting to adopt automated advice in order to keep up with the Joneses, the sector cannot forget the next 10 years will see firms come and go as they claim their digital augmented offering is the best. And it is those firms that put ethical, professional and quality advice at the core of their automated digital offering that will naturally rise to the top.
This article originally appeared in Professional Adviser