January 30, 2019

Four ways to help clients understand hybrid advice

Simon is Business Development Director at Wealth Wizards, with 20 years' experience driving the development of automated financial advice.

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As technology transforms how individuals manage money, writes Simon Binney, the advice sector as a whole will face a more discerning and demanding client base, which will have quality and convenience front-of-mind

The choice of a financial adviser can be based on a myriad of reasons - a recommendation, a review, the possibility of online advice, perhaps an inheritance or windfall. What should be at the heart of any decision to select an adviser, however, is quality, regulated advice.

This may sound like common sense but, as we enter a new era where clients can access ‘advice' and guidance from a whole range of sources, there is the danger the customer will become ‘lost in the weeds', not fully understanding what they are obtaining. This is why it is up to us as an industry to communicate the real importance of regulated advice.

Some of the things consumers are now insisting on are convenience, speed, and reduced risk. The pressure is on for the sector to deliver this in the backdrop of pension freedoms, a declining number of advisers and the advancement of technology.

The industry has responded with a rise in digital advice solutions, such as our platform at Wealth Wizards, which does the ‘heavy lifting' of fact-based data collation, automated quotation feeds, solution mapping and suitability report generation and leaves the adviser free to focus more on customer-facing and relationship building tasks.

This maturing hybrid model of part human adviser and part automation is likely to be the future. We are starting to hear the view that people tend to be more trusting of a hybrid combination of technology and human decision-making when it comes to financial matters, with technology providing the facts and the human element the emotional aspirations.

So how can advisers using hybrid technology instil confidence in clients that they are selecting the right financial adviser for them?

Hybrid makes advice more accessible: Explaining the hybrid proposition and emphasising it is underpinned by regulated advice is essential. The growth of the sector is being driven by a new digitally-savvy generation of baby boomers - closely followed by ‘Generation X' and the millennials.

The reality, however, is that many new clients will be those nearing retirement with lower savings and investments who may never have used an IFA before. At Wealth Wizards, for example, our own model of automated advice is designed around those who have on average £150,000 in their pension pots. For this group, financial advice is something that was previously out of their reach but technology can help close this advice gap.

They may be intrigued by an online or automated offer but may not understand where the human interaction begins and ends. But the advantages are clear - using a fully-regulated automated advice platform, an adviser can field a call from a customer in the morning and send them their regulated advice document that afternoon. They enjoy convenience and professionalism in a staggeringly short space of time.

The technology journey: Navigating clients confidently through new technology is equally important. It is very clear we are only at the start of this technology-driven sector revolution. With the launch of Open Banking last year, the introduction of the pensions dashboard in a few months' time, and new software underpinned by artificial intelligence, we are going to see greater sophistication that is beyond anything we enjoy today.

It will be an important part of the adviser's communication process to reassure new customers it is only going to get better for them, thanks to technology. As automated advice progresses, then it will enhance the adviser further, helping to build and secure existing clients while driving new business.

Defining the difference: We have a responsibility and a duty to be clear about the varying types of advice available. The term ‘robo-advice', for example, has been claimed by many assets-under-management firms and discretionary fund managers/providers - however, this process is simply filling out an online questionnaire that then generates a risk level and automatically places an individual in one of five funds. Technically this is an ‘investment platform' and provides very limited advice in one specific area of investment - or sometimes no advice at all.

Then you look at ‘automated advice' - regulated financial advice that is charged on a case-by-case basis rather than as a percentage of assets. It is a completely different product to investment platform robo-advice. Automated advice is able to deliver a range of solutions including the complexities of whether to transfer DB assets or retirement advice from the planning stages through to at-retirement and continuing into retirement income planning.

Accountability: A major feature of regulated automated advice is that it provides a full audit or ‘paper trail'. It does not rely on potentially flawed human judgement and instead uses AI and machine learning to make an advice ‘blueprint' that can explain the logic behind any financial advice recommendation ensuring these are applied consistently to every piece of advice delivered. For nervous ‘newbies' this is an increasingly important feature, offering them the peace of mind, care and attention they need.

Educate clients

Right now, we need to educate clients on how technology can improve the advice process - yet it will not be long before consumers will be actively insisting on the hybrid model to service their financial requirements.

We only have to look at other parts of people's lives that are now taken for granted - think streaming of films on-demand or ordering online and having products delivered on the same day. For those businesses still to embrace automated advice, or which have feared to because of compliance restrictions, regulated automated solutions now enable them to scale up safely, by managing risk.

As technology transforms how we manage our money as individuals, the advice sector as a whole will face a more discerning and demanding client base, which will have quality and convenience front-of-mind.

This article originally appeared in Professional Adviser

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