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Ian McKenna in San Jose: Online services can complement traditional advice


The viability of digital or automated advice has been one of the most emotive debates in our industry this year.

Perhaps because most digital advice in the UK is in the development, rather than delivery, phase there seems to be a perception that digital and traditional advice solutions are competitors.

In the US, where digital advice has been a reality for the last few years, it is becoming increasingly clear that the channels can actually be very complementary. This is one of the key messages that has emerged from the first day of this year’s Finovate Spring, the West Coast event where the Bay area meets Wall Street to forge the future of personal finance.

In recent months, an increasing number of digital wealth solutions have sought to embrace the traditional advice community. Betterment recently launched an institutional version of its proposition as an outsourced investment option for advisors, whilst LearnVest and Personal Capital have been increasingly aggressive at recruiting advisers to work within their organisations.  

This trend continued yesterday when one of the most impressive digital advice businesses I have met, FlexScore announced its Pro version for advisers. The company has developed a gamified service designed to help consumers do better with their money. It provides users with a personal financial success score guiding consumers towards financial health.

The system brings together tools to monitor personal budgeting, assets and debts goals as well as helping the client set goals. Depending on how these goals are prioritised can significantly impact the user’s score.

Advisors will provide the Pro version of the software to clients and encourage them to maintain their financial information in it, this is prepopulated from an aggregation feed. The progress towards improving their score will become a key part of the conversation when they meet the advisor, helping the advisor encourage positive client action and focusing on the future not any recent market movements.

Direct consumer users of Flexscore will also be able to use it to find an advisor. From the My Advisors area of the website, the customer can search and refine advisor selection based on advisor specialism. They can search for advisors by advice area including 401Ks (the US equivalent of a personal pensions), insurance planning, debt management, annuities, long term care, collage costs, tax planning, investment management, retirement planning and estate planning. Advisors can also be selected by the professional designations they hold. This also shows the basis of the advisors charge rates and how they work with clients.

After selecting an advisor they would like to consider, a client can send them a note outlining the areas they need help on. This can enable the advisor to view their information, view and edit their information as a way of making suggestions or not share anything. After granting an advisor access rights consumers can withdraw this at any time in the future. Before proceeding the advisor can look at the client information before deciding if they want to accept the client.

The first advisor partner to adopt the Pro version is United Capital a firm with 74 advisors in 46 offices and $9.3bn dollars under advice. I think it is important to understand the people behind FlexScore run a highly successful RIA business themselves so they really understand financial advice. This is another service that I think could be very successful in the UK.

Another organisation following the trend of building digital propositions to support traditional advisors is Motif Investing whose individual investor service I wrote about in my F&TRC blog of Finovate Fall last year. The company offers a new style of investment management following Motifs – essentially investment ideas that can follow virtually any trend. The company allows trading of up to thirty stocks in a single motif for a fixed monthly fee.

Although it has yet to announce pricing for the advisor version which will allow single click rebalancing of all a client’s motifs and the underlying investments, the consumer version is only $9.95 per month and it is reasonable to expect advisors would get a discount.

I imagine quite a few fund managers and DFMs will be worried by such pricing. These organisations have much to fear as Motif tells me it plans to bring its investment platform to the UK possibly as early as next year.

There is no shortage of online sites in the UK promising consumers protection information. Far too many of these, however, are simply lead generation operations that do a very poor job of informing and educating consumers but just want to sell a lead. Compared to the services demonstrated by Sureify these sites are just embarrassing.

The service shows a great way to help consumers understand protection even before they speak to an adviser, whilst at the same time reinforcing the role of the professional adviser in the sales process. The UK industry could learn a huge amount from them.

During its research building its service, Sureify identified that consumers find life insurance is confusing and feel under pressure to buy from an advisor but actually want to learn more about life cover before proceeding at their own pace.

Its proposition is designed to support, not disturb, the traditional advice model but to do so in away that enables the consumer to have a far better understanding of protection issues before they meet with an advisor.

Highlighting a 2013 study by financial services research company LIMRA which revealed that 86 per cent of consumers research their options online before buying life assurance, the company aims to provide a solution for consumers looking for an unbiased place to find information and walk away without the pressure to by buy immediately.

Sureify also stresses that it is offering a life insurance service built for Millennials, who should be the key target market for life assurance. This generation think very differently to Baby Boomers and Generation X yet how many life offices still build their marketing around the thinking of the latter group?

The website is packed with information and videos to explain life assurance. Whilst the current version does not yet cover the full set of products, these are in the pipeline. After asking just 10 questions consumers receive a personal estimate and a two page summary of their needs together with a recommendation of an agent in their area. Clearly the advisor will build on this picture but this strikes me as a far better way to engage potential new protection customers.

Swiss software supplier Crealogix demonstrated a great way to ensure that consumers understand complicated products, before they are allowed to buy them with their integrated “learning store”. Although designed to support online banking I see this as having a far wider application and potentially being ideally suited to support digital advice and wealth management.

The service works much like many CPD training systems for professional advisers by presenting information and then asking the user a series of multiple choice questions.

There could be enormous consumer benefit to the widespread deployment of such a service although it probably has to be recognized that this would almost certainly be undermined by the excessive mandate of the financial services ombudsman which is further evidence that FOS has now become an organisation that principally exists to serve a wealthy few but make it impossible to deliver affordable financial advice to the vast majority of the UK electorate.

Having already had some previews there is more great stuff coming tomorrow from Finovate and I will be writing a similar summary of day two.

Ian McKenna is director of the Finance & Technology Research Centre



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