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Scott Gallacher: The real threat to financial advisers

financial advisers demise
The demise of financial advisers has been predicted so many times that we have become accustomed to people crying wolf.

That said, it is important to remember that eventually there was a wolf and there is a danger ignoring these warnings completely will end up with us being eaten.

I have been very sceptical of what many see as the biggest threat: robo-advisers. However, I am concerned about the announcement of Aviva’s new Alexa skill, which allows clients to access their pension valuations from their smart speaker.

I am a big fan of my own Alexa and with the advance of smart tech, increased integration, artificial intelligence and machine learning, I can see a future where many people conduct their own financial planning via their smart speaker.

The problem robos have is one of engagement. You have to proactively log in, input data and answer some questions online.

While this will get better with even greater integration (apps such as MoneyHub are very useful), there is still something of a barrier.

A switch to smart speakers does not remove these issues completely but it makes it somewhat easier for people to engage.

I can imagine someone getting up in the morning, hearing the latest pension or retirement scare story on the news, then asking: “Alexa, what’s my pension worth?”

Followed by: “Alexa, what will that give me when I retire?”, “Alexa, how much am I paying into my pension?”, “Alexa, how much should I be paying in?” and “Alexa, increase my contributions from £100 to £200 per month.”

It will take some time to get to this point but it could be the beginning of the writing on the wall for mass market advisers.

This is not necessarily bad news. There is undoubtedly a huge advice and savings gap in the UK and the use of technology to help address it in an affordable and profitable manner is largely to be welcomed.

I acknowledge that most advisers will think they can add value over and above that of a robo or Alexa skill for most people.

And while I agree we should be able to add real value, I doubt we add significant value above and beyond the real costs of that advice for the mass market.
In my experience, those advisers that claim to be offering real value for mass market clients are, in the main, charging too little for their time and expertise.

While it is their right to do so, I do not think this is a sustainable model for the financial services industry as a whole.

Who wants to spend the time and money training to be an adviser and ultimately end up earning less than an equivalent solicitor or accountant (but with much higher risks and much less kudos)?

To be honest, most of our parents would rather say we were a solicitor or accountant than an adviser, with the label still somewhat tainted by the many misselling scandals.

The good news is that there is a clear shortage of advisers. A focus on more affluent clients, where the costs of advice can be significantly outweighed by the value we can add, is surely the future for a sustainable and profitable advice profession.

Scott Gallacher is director of Rowley Turton 

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Comments

There are 15 comments at the moment, we would love to hear your opinion too.

  1. Interesting thoughts but a. I doubt Alexa will tell anyone how much they need to contribute to a pension as this is advice b. one of the main reasons for the so called savings gap is I know very few people who wake up in the morning and think I know I need to increase my pension contributions.

  2. The spectre of AI is likely to have a greater adverse effect on the lawyers than financial advisers. In the States, online start-ups like LegalZoom, Avvo and LawDingo are automating “low-level lawyerly tasks” — not just research but contracts and wills, and it`s been estimated that 70%-80% of every hour billed by lawyers probably doesn’t require a law licence.
    Perhaps most parents won`t be wishing we were lawyers in the future ….

  3. ‘Scott Gallacher: the real threat to financial advisors.’

    Is he really such a threat? Why were we not told before? 😉

  4. Nicholas Pleasure 6th September 2018 at 2:05 pm

    “Alexa, I want to invest £500”

    “Playing 500 miles by the Proclaimers from Spotify”

    Interesting thoughts but I still feel the tech is some way off working naturally. It will get there but by that time I hope to have retired.

  5. Nicholas Pleasure 6th September 2018 at 2:07 pm

    Will Alexa have to sit the new CII annual level 4 exam?

  6. You had to ruin the fun Nicholas.

  7. Scott, you are psychic. Or perhaps you are in the know…

    Very soon, the link up between open banking and forward thinking platforms and proper AI will start to formalise. And the world will have itself a mass market financial planner.

    It’s only a matter of time, I’m afraid.

  8. More fundamentally with Alexa, is the security risk. In theory, anyone can ask it a question, and as I understand it, it will answer, including having it order from Amazon. Not sure it spouting on-demand, how much one’s pension is worth, or how much is in your bank account is acceptable!

  9. You must be joking. Give Google all this info and your life won’t be your own – others will own you entirely.

    This type of gizmo is the greatest threat to your personal privacy and security. My household actually had one given – and we politely gave it back. At least an adviser has an ethical responsibility to treat your information as sacrosanct.

    If you want to use this tool, you use it at your own risk – there are no comebacks – even if it’s wrong and these things are far from infallible.

  10. Alexa how much is my next door neighbour’s pension?

    Alexa, are you giving me advice or guidance?

    Alexa this person from ‘claims r us’ wants to have a word with you.

    Alexa, do you have PI insurance?

    Alexa, have you completed your Gabriel reporting?

  11. Christopher Petrie 6th September 2018 at 5:34 pm

    My parents have referred several of their friends to me, who have subsequently become clients.

    Never once have I thought they would have preferred me to be an accountant. Why would they?

    I thought this article was pretty simplistic and rather odd, to be honest. How will Alexa give IHT advice or income drawdown planning? It would be subject to the FCA rules and FOS interpretations just as I am. It’s a non-starter for the next decade or more for sure.

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