January 28, 2019

The overlooked quality that makes automated advice so powerful

Charles is a former PPA Business Journalist of the Year, specialising in AI and Fintech. He began his career as editor of Euro Business Magazine and now writes on the rise of AI and algorithms in business.

Smart Platform blog
An OECD (Organisation for Economic Co-operation and Development) investigation into automated advisers gave the concept a big thumbs up.

Two main virtues led the way: “The main value proposition of automated advisers for retail clients is to make investing more affordable and accessible,” said the report.

Cost and access. The industry itself agrees –automated advice has been exploding in popularity for these very reasons. Swathes of consumers are now getting the advice they were missing because they were too busy, too poor or too shy to ask for help.

But 18 months on from the OECD report and a third headline virtue can be added to the list: quality. Automated advice is proving extraordinarily accurate and dependable.

It's worth lifting the bonnet on the automated adviser to find out why.

Let's start with the way advice is compiled. Unlike a human professional adviser, who works in isolation, the automated adviser is the result of many minds working in harmony. In the pensions world, the variety of issues can be pretty daunting. There are experts on asset allocation, equity release, and defined benefit pensions, but it's a rare character who'd claim to be an authority across the full spectrum of pensions subjects.

A automated adviser can be programmed by experts each operating in their area of excellence to overcome this limitation. Their work is then peer reviewed. It will be checked for adherence to official best practice guidelines. Compliance officers can scrutinise every step.

Over time, the advice can be checked, modified, and improved. It's a ratchet effect: each tweak improves the quality.

The quality of the user experience is part of this. Online systems can be A/B tested to see what users like best, or where they get confused, and then iterated. Facebook once tested 41 shades of blue via multivariate testing to identify the stickiest shade for users. Social media companies are being accused of making “addictive” products – a result of A/B testing. 

Information can be updated rapidly. Real-time market data is an option. Clients can use the platform knowing they are interacting with an up-to-date service.

Into this mix comes artificial intelligence. Wealth Wizards AI system, called Turo, optimises the platform in a variety of ways. It learns the house style of each financial provider, and then configures the advice on the platform to match. It also acts as a paraplanner, gathering market data and presenting findings for the human adviser to sign off. Turo is particularly good at answering critical questions, such as the merits of equity release, or whether a client should transfer their defined benefit pension.

These ingredients add to a powerful proposition. So yes, automated advisers solve the cost and access problem. But they are also elevating quality.

This is critical. We all take financial matters very seriously, and trust automated advisers to provide professional grade consultations. Platforms like Wealth Wizards are trusted not merely because they are easy to use and affordable, but because the results are first-class.

And there's a final factor to consider. At first it seemed like automated advisers would compete with human advisers. But a different dynamic has emerged. A hybrid model is now dominant. This means the automated adviser can work alone, or in partnership with a human adviser. Often clients want to talk to a real person to ask questions, to go deep on a subject not covered by the automated adviser, or for reassurance. That model works well.

The human adviser also benefits from the digital support service. Automated advisers can handle a large volume of enquiries. They do the mundane work, answering standard questions. The human advisers are liberated to focus on deep advice. Wealth Wizard's platform can be set-up to notify users as to when their situation would better be handled by a human. There's no over-stretching of what the platform can do.

Automated advice is a permanent feature on the financial services landscape. It is only going to grow in prominence. But selling it purely on cost and accessibility is an injustice. The core mechanics are guaranteed to deliver ongoing improvements in quality over time.

Consumers and advisers are both set to gain.

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