Londoners last week were hit with traffic snarl-up as black-cab drivers staged a protest over a rival taxi service called Uber.
Uber is a smartphone app designed to connect passengers with drivers. Because the meter in an Uber car is also a smartphone app, it does not fall under the same regulations as Hackney cabs, which have fitted meters. It is clearly a disruptive force, highlighted by the strength of feeling among the black cab community who went on strike. Anything that can cause 12,000 opinionated professional London drivers to stop ranting about politics and turn off TalkSport for an hour must be a big deal.
I admire disruptive innovation such as Uber. One must embrace new technologies and new ways of doing things or risk extinction. But where is the disruptive innovation in financial services? You could argue that direct investment platforms represent a disruptive innovation relative to advice.
But the ability to make and implement your own investment decisions online does not replace or even marginalise the value of advice, which is tailored to the needs of an individual.
It was interesting to read comments from FCA chief executive Martin Wheatley about advice firms failing to innovate to close the advice gap. But I remain unconvinced that there is an advice gap to fill. When we talk about an advice gap, often we mean a product sales gap. Since the banks abandoned retail financial services in the run-up to the RDR, there is less capacity out there to advise clients and distribute financial products. But this does not necessarily mean that those who need and want advice cannot get it. I rarely come across IFA firms which could not deliver advice to another 10, 20 or 100 new clients this year.
The FCA is launching Project Innovate, which is designed to help firms innovate in technology, including delivery of automated advice. As much as I love technology and disruptive innovation, I cannot see a computer replacing an adviser in the near future. Delivering advice requires the combination of knowledge, skills and experience which cannot be bundled up within a computer algorithm.
This is not to say that technology cannot and will not disrupt existing adviser business models over the next few years. Returning to the example of D2C investment platforms, these are already reducing the value of implementing financial products to nearly zero. Why would an investor pay you 2 or 3 per cent (or more) of their hard-earned cash to implement a product when they can go online and do it for free? Wait until Amazon adds the ability to buy funds, pensions and protection along with your Kindle book, MP3 album or weekly grocery shopping. Once that happens, no consumer in their right mind is going to tolerate paying more than a token sum for product implementation.
Uber is shaking up the worldwide taxi market and it is only a matter of time before things arrive to shake up existing adviser business models. This disruptive innovation may not come from an obvious direction. It will require advisers to adapt quickly, let go of old ways of doing things and focus on their clients to remain commercially viable.
Martin Bamford is managing director at Informed Choice