This week’s Finovate event could not have been better timed. The week after FCA chief executive Martin Wheatley acknowledged that advice can be given online without human interaction it gave a great opportunity to consider the latest innovation in this area.
This is an emotive subject amongst advisers. The original story of Wheatley’s remarks plus the follow up views of Andrew Firth and David Severn are the top three commented stories on Money Marketing online as I write.
The adviser market seems polarized over this issue. Many protest that automated advice is not possible. A smaller, but significant, number suggest it is the future of advice.
Finovate included firms building technology to compliment traditional advice and others seeking to directly compete with it. In a showcase of leading edge technology solutions some demonstrated services that would disturb, if not terrify those who claim advice cannot be automated.
To me, it is important to look at how advice and technology be complimentary. Of all the presentations at this year’s event probably the most relevant to small adviser firms came from YourWealth.co.uk. This is a consumer personal financial management and financial planning system designed to help consumers take better decisions about their money. Unlike many such services they are aligning with advisers to help them provide digital services to their clients.
YourWealth’s Money Hub Connect provides the ability for consumers to model scenarios from Money Hub and share them back to their adviser. This is delivered via a secure messaging box enabling the adviser to review, edit and if they wish create new scenarios for the client. The adviser can then review these and either agree or provide alternative recommendations.
The service is essentially a very powerful lifetime cash flow calculator from which you can build out individual events and situations. This can benefit from aggregation of information from bank accounts and credit cards to help bring their plan to life, delivering a level of detail that many of the traditional cash flow planning tools used by adviser will find it challenging to emulate.
The latest version of the service costs advisers £1,200 per year for up to 15 users and up to 20 clients using the retail banking aggregations. Additional licenses for the bank aggregation cost £10 per client per year. Fund platform aggregation from Seven IM, Ascentric, Cofunds, Nucleus and Praemium is included free of charge.
Advice Games gave an alternative perspective on the future of advice demonstrating services explicitly designed to disturb traditional methods of financial guidance. It claims that by building a service around measuring consumer motivation it can actually build a better advice process than the traditional face-to-face model.
The founders have a track record in this direction, having successfully built a digital mortgage advice business eyeOpen, which was sold to Aegon. Founder Diederick van Thiel tells me the Dutch regulatory authorities were as cynical as many Money Marketing readers when he suggested using an abbreviated questions set and that taking such an approach could produce the same quality of lending as a far longer set of requirements using the traditional process.
Contrary to regulatory expectation I am told this was successfully implemented in conjunction with a number of major lenders in Holland including Rabobank, ING and ABN Amro.
Advice Games is now building on this experience and mixing consumer motivational profiles with demographic data and gamification to produce an artificial intelligence platform capable, it says, of better predicting the products that are most suitable for a consumer than traditional services using advisers.
The service mixes transactional, social and location data and self learns from every interaction. Presently the service is again only being targeted at mortgage advice although Advice Games says it has aspirations in the investment market too.
There seems to be an assumption amongst many advisers that a move towards technology will disadvantage smaller firms. In practice many of the organisations seeking to deliver advice and guidance in innovative ways are smaller entrepreneurial ventures.
Money on Toast is run by a small adviser firm which says it is offering an automated holistic financial advice platform which can do in a few minutes what might take an hour with an adviser.
I expressed concerns about this when I looked at it in this column last year.
From the demo given at Finovate I still think there are areas where it needs to improve the detail of its offering, but this needs more than the seven minutes allocated to Finovate exhibitors to form a full view. I plan to look again at the service in more detail soon.
Some people who question if it is possible to build truly automated advice point out that meeting the Financial Ombudsman’s standards may be challenging for such services.
Whilst this is true, there are many reasons why I believe technology is potentially better placed than human advisers to meet that particular challenge. I could write a whole column on that subject alone and will return to this subject in the near future.
For now, however, I would point out that the traditional advice model also faces issues with the way FOS works so perhaps this is an area where human and automated advice have a common cause.
This column has focused on issues arising from Finovate Europe that are directly relevant to adviser firms. Space precludes me from exploring the key trends and the extent identified to which they are relevant to the wider market place so I have covered these in a blog on the F&TRC website.
Ian McKenna is director of the Finance and Technology Research Centre