Written by Adam Jones, Guest Blogger on Wednesday 8 April 2015
It’s good to take stock of mankind’s achievements once in a while. We can automate the take-off and landing of commercial planes in treacherous conditions. IBM’s Watson is being used for patient diagnosis and clinical decision support. The farthest corners of the globe are mapped, photographed, annotated and available for free and you can track someone’s position to within a metre using GPS on a sub £100 smart phone. You can navigate along a dirt track in Botswana on Google street view, stream the world’s music collection via a mobile data connection on Spotify or carry thousands of books with you on a Kindle.
But of course, Financial Services is uniquely complex. We cannot, under any circumstance, tell someone which product they should open, and which asset they should direct their cash towards.
I’m not being flippant. Well, perhaps a little. I appreciate that there is a vast array of investments available for people, some of which will be suitable some certainly won’t. I also accept that there are a raft of tax implications and a wide range of variables about the customer, their life and the people they interact with which need to be taken into account.
What I don’t accept is that there is a mystique to the advice process; a sanctity to cocoon it from technological advancement. In fact, I would argue quite the opposite. If you can’t make the advice process automated and repeatable, it becomes very difficult to stand behind in the case of a FOS investigation or litigation.
The hard truths
In the context of automating advice (or robo-advice), there are a couple of truths that we shouldn’t look to sweep under the carpet
Truth One – We don’t need to ask questions any more
There is a huge amount of data available about our clients (e.g. how they spend their money, what they do with their time, what music they like, what cars they drive etc.). The volume of data in the world is at its greatest level ever and most predictions show an enormous growth curve over the next decade.
Truth Two – Most people would benefit from full advice
Full and holistic financial advice would be the optimal solution for most people, were cost and time not taken into the equation.
With all of this in mind, I don’t accept that fully regulated holistic financial advice can’t be automated. I don’t believe there is a subtle nuance, from fact find through to investment selection, which can’t be programmed, or an intricacy of process which can’t be made auditable and repeatable.
Going all the way
Of course, some forward thinking firms are making progress. The States has been leading the way with Robo-Advice (Betterment, LearnVest and Wealthfront for example) and now UK firms are picking up the baton with the simplified advice offering from Wealth Horizon (powered by Parmenion) and TD Direct looking to add automated guidance to its execution only proposition. But this is only solving part of the problem. Simplified advice is one thing, but automating full fat advice to deliver low cost solutions for clients is still absent from the UK market. With pensions freedoms now live and in full effect, it is a solution which is needed more than ever.
So, I would like to issue a challenge to the industry; give me an example of something in the advice process which you think can’t be automated. It might be a particular case study, an element of the fact find, or an asset class which is too complex to understand. Show me that awkward nugget that will change my world view… or perhaps, it really isn’t that hard.