Generalist advisers will be put under pressure by cheap automated alternatives as consumers increasingly question the value of advice, online adviser Wealth Horizon has said.
Solutions which guide consumers through an automated advice process can be delivered cheaper than face to face advice and in many instances serve consumers' financial needs, said chief executive Chris Williams (pictured).
Generalist advisers will face the perfect storm of increased investor savviness on the one hand, the Retail Distribution Review's transparency around fees on the other and the emergence of easy to use intelligent computer systems, he said.
Automated advice services are quickly becoming more common with an increasing number of advisers and providers considering the options of integrating an automated solution alongside their conventional business.
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The regulator also recently indicated its increased interest in automated advice, saying it will explore the practice in a dedicated ‘themed week' in the autumn.
Meanwhile a Treasury and Financial Conduct Authority-led review of the financial advice market is underway, examining how advice can be delivered more cheaply for the less wealthy and what role innovation could play in reforming the market.
Williams suggested advisers whose service mainly consists of putting together and managing portfolios could soon find themselves shunned by consumers who feel they can do it themselves.
For advice needs that consumers find difficult to solve themselves - such as planning their retirement - they will seek the help of more specialist advice services and be willing to pay a premium, he predicted.
"A generalist adviser who is just really managing portfolios of funds for people has got a problem because fees are going to come down," Williams said.
"Investment management and portfolio management are easy to automate. There's an abundance of information out there. People will question the fees they are paying.
"But where there is real complexity, where an individual doesn't really understand what's happening people are happy to pay for it in that space. That is where we will see fees increase because there is a real need for advice and for getting it right."
Williams suggested consumers will become more happy to hop from one advice service to the next as they seek a service that fits their particular needs.
Automated services could be used for simple investments of spare capital while financial planning will be sought at the time of a particular life event or for complex needs.
But human advisers also have a place where a client seeks help with their finances after an emotional event, such as a divorce, Williams said. This is when they may want the emphatic support a robot can't give.
In addition, Wealth Horizon found its consumers tended to seek a human adviser to verify their choices following the online process.
Williams said: "Robo can go a very long way towards meeting financial advice. What it can't do is replicate the emotional, the empathetic [element] of having a human work with you. It's simply a choice whether they want that or whether they are happy to do it online.
He added: "I am a big fan of financial planning, it's by far the best way to approach your finances if they are complicated enough to require it but it's not for everybody.
"Financial planning will continue. We will see a rise of what people do simply quickly being done online and will see a rise in quite technical complex advice being delivered at certain times based on needs."
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