The new Prime 2 offering provides just the right blend of human touch and automation
Few subjects have caused more controversy in this industry over the last few years than robo-advice. I have always been clear I am an evangelist for advice automation, but equally that it is advisers who have the most to gain.
This week, I want to highlight a service that is a great example of what can be achieved by providing automated advice delivered by humans.
The machine does the hard number crunching, modelling millions of scenarios in seconds in a way no human could match, but the human communicates with the client, providing empathy and other soft skills. This is the blend that will be attractive to the most consumers.
It is important to recognise that automated advice services are quite literally in their Jurassic phase and we are only just scratching the surface of the possible. In this context, I have been delighted to look at the new Prime 2 offering from Hub Financial Services, the technology arm of the Just Group.
Designed to identity the most tax efficient retirement income solutions for consumers, it will find the best blend of annuity and drawdown, including an open market annuity comparison, both standard and enhanced, as well as a drawdown comparison, currently using the Just product only, although presumably it could be configured to use third party products.
The service is designed for less sophisticated investors to make advice more affordable to the masses, rather than as a solution for millionaires.
Currently, Prime 2 assumes the consumer will always take the maximum tax-free cash and an income, or use the tax-free cash as part of the income, although development is in hand to allow for more options. Equally, it supports proving an income but not lump sums, so cannot yet consider tax-free cash only.
This service has been built in a far more complete way than many of the other automated services I am seeing right now. For example, it can support both an automated advice route and automated non-advised. Both the firm deploying it and the client can choose what route they want to go. Personally, I think it is wrong to seek to force advice on people who choose not to want it.
The service can be also deployed using Hub’s own financial assumptions growth rates and scripts or those of the client firm if they wish to build and write their own. The service includes one of the most extensive set of rules we have come across to ensure any case not suitable is driven out of the process. Optimising annuity and drawdown for sustainable income, not for lump sums that will come later.
As mentioned, it is designed to be used not as a full automated online service but as the automated system behind human staff.
Even among millennials, there is substantial evidence that, while people are increasingly willing to use automation in much of their advice process, they appreciate human involvement as a validator. This service uses humans to ask questions and enter the answers. So the human communicates but the machine gives the actual advice.
Given the power of this solution I am not surprised SimplyBiz has recently struck a deal to enable its advisers to refer clients to Hub. This is a great way of delivering advice that people value at a price they can afford; a challenge much of the industry is struggling with.
Prime 2 could also be an excellent solution for insurers looking to meet their PS17/12 obligations which come into force in March.
This is a scale solution: deployment setup and ongoing costs run to tens of thousands of pounds, so it is not for small adviser firms. However, it is certainly something larger firms and other scale organisations should look closely at.
I can see huge potential for networks, support groups, non-financial services businesses and other institutions. Hopefully, some of these will find a way for smaller advisers to access it.
Overall, Hub and Just are doing some really interesting things in the digital space. It is worth also having a look at their Tonic proposition, which is taking a Vice style approach to marketing financial products. Some very clever thinking going on here. It will shock some people (it is not at all the genteel way people tend to present advice) but I think it is really refreshing.
I have also been given a sneak preview of Prime 3, which is likely to take at-retirement advice to a whole new dimension, having found a way to automate drawdown, annuity and equity release advice in a single process.
That is still some months away but, in the meantime, Prime 2 has enormous potential to help reduce business’ costs by automating their at-retirement advice while still maintaining a human touch.
Ian McKenna is director of the Finance & Technology Research Centre