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Nic Cicutti: Online advice deniers need to think again

Face-to-face advice as practiced by the majority of IFAs will be seen as an anachronism.


Who is the most important writer in Money Marketing? Don’t worry, I know I’m way, way down the list in that respect. No, if I had to make a choice, I would come up with two names.

One is Tony Wickenden for his informative articles on tax-related matters. As for the other person, before I name him I first want to tell you a story.

About 15 years ago I was sent a detailed piece of research about the internet by Pearl Assurance. The study, which ran to dozens of pages, attempted to set into context the already evident expansion of internet use among the UK population at the time.

I no longer have the document in question but my strong recollection is that while it acknowledged the growth in numbers of people going online, it also pointed out that there was a massive gap in usage among certain social groups, particularly manual and unskilled workers – Pearl’s customer base.

Very few of them owned computers, the report noted and insofar as their children had access to the internet during school hours, once they got home they tended not to use the web for any purpose, social or otherwise.

Pearl’s document was part of a carefully-structured argument to the effect that assumptions even then about the internet’s potential to replace many of the functions of face-to-face advisers were premature at best.

While Pearl was careful not to say that this would remain the case for all time, it clearly believed demand among customers for its small army of salespeople would continue for years to come.

Barely two years later, Pearl’s parent company AMP sacked its entire 1,000-strong salesforce. Meanwhile, Pearl itself has been through a bewildering number of sales and restructurings over the past 15 years and its remaining funds under management are now part of Phoenix Life.

And what of the internet itself? It’s doing rather well, in contrast. According to the Office for National Statistics in August last year, 36 million adults in Britain – 73 per cent of the population – were accessing the internet every single day. That figure is probably even higher now.

The younger you are, the more likely to go online. Almost all adults aged 16 to 24 years (99 per cent) had used the internet. For 25 to 34-year-olds, acess is used  to carry out a wide range of established everyday activities, such as purchasing goods or services online (92 per cent), banking (76 per cent) and selling goods online (45 per cent).

The point of this story is that rather than express amazement at comments such as those from the FCA’s Martin Wheatley, who told a Treasury select committee at the beginning of this month that “financial products can be sold online on an advised basis with no human intervention”, IFAs ought to be thinking really hard how to implement what he said.

Even more significant was Wheatley’s subsequent answer to TSC chair Andrew Tyrie, who asked if it is possible to offer advice without human intervention. Wheatley replied: “yes”.

When I have written about this in the past, the majority of responses have tended to be similar to those of Pearl Assurance’s report 15 years ago.

Last week, they were even more dismissive. “Utter rubbish”, was one comment at the bottom of Money Marketing’s story, ironically published online. “Incredibly imbecilic”, was a second remark.

Another person suggested that if we followed Wheatley’s logic doctors should be replaced with Game Boys, which leaves me wondering if the poor man has ever heard of NHS Direct, which uses a combination of online and telephone-based assessment and triaging of potential patients, saving the health service millions each year in unnecessary GP call-outs.

Even advisers who acknowledge the growing relevance of the internet to financial information-gathering and decision-making tend to see themselves as physical intermediaries within the online process. In other words, they assume a client is almost incapable of making financial decisions without a reassuring corporeal presence to guide them.

I will stick my neck out here but I actually do not believe that is true. Or rather, it may be true for most of my generation: 50somethings and those older than me. It is certainly less true for those in their late 30s and 40s and, my gut instinct tells me, is highly unlikely to be the case for increasing numbers of 20somethings.

Yes, they may want to pick up the phone and confirm certain aspects of the online advice they receive from time to time. If there are highly complicated issues to address they may even request a meeting with an adviser.

But in another 15 years’ time the idea of face-to-face advice as practised by the majority of IFAs will be seen as an anachronism. Either that or advisers will miss out on a historic opportunity to reach the millions of people they complain are victims of the so-called “advice gap”.

Which is why for me, apart from Tony Wickenden, whose copy I always try to struggle through, the other most important writer in Money Marketing is Ian McKenna. His report on last week’s European Finovate conference in London was inspirational.

Trust me on this: if IFAs fail to make use of McKenna’s ideas and experience now, they will regret it in 10 years time.

Nic Cicutti can be contacted at


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There are 50 comments at the moment, we would love to hear your opinion too.

  1. Yes, the Internet has a growing and important role to play in the delivery of advice. But the world is a complex place and I think it is all too easy to suggest the doom of one approach over another. That by the way is not to deny the power of the internet which would be a very dangerous thing to do. So I predict some groups of people will seek advice without “human interference” others will continue to value the “face to face” delivery of advice.

    There will be winners and losers in both forms of delivery

  2. The challenge with making advice available online is getting people to pay for it.

  3. Eff. Oh. Ess.

  4. I agree that the internet is going to play a bigger and bigger part in the provision of financial services, where i disagree is that this is going to remove the human element from advice.

    For me the provision of advice is only possible through human interaction, anything provided solely by a computer is guidance only. Will guidance become more prevalent than advice? Who knows, only time will tell.

    The issue i see with guidance and removal of human interaction is who actually takes responsibility for the outcome? I can’t see providers being happy to take responsibility for what the public is inputting into it’s “state of the art advice providing human free” point of sale system. Equally i can’t see the public being happy to take 100% of the responsibility for financial decisions on products they don’t understand.

    Of course the above is all my humble opinion and i may just turn out to be a naysayer!

  5. At the moment the internet is long on information short on advice. Clients often come to us once they have been totally overloaded with conflicting opinion online. But as the technology driving on line advice interfaces get more intuitive and easier to navigate some may go that way. But the investment required to set up a system that works and that can adapt to changing legislation and investment conditions will be phenomenal. Then the question becomes will people be prepared to pay enough for on line advice to justify that investment.

    The last big imponderable is intuition. Last week a client came in and said they needed to buy a £100,000 compulsory purchase annuity. My first question was why? He left without buying anything – which as he yet had no need of income the £100k tax free lump sum death benefit was best for him. IT that clever will come, but it will take a while; meanwhile the risk of huge claims for dodgy online advice will deter investors…

    That said McKenna is my first read every time…

  6. – if IFAs fail to make use of McKenna’s ideas and experience now, they will regret in 10 years time –

    Should we take advice from a professional (supposed) journalist who cant even spell (or type) (or check his very poor copy) Try ‘it’

  7. @NickBamford – how is your ‘non advice’ platform going?

    You seem to have downsized on adviser numbers so I assume your model is now non-advice?

  8. goodness gracious 20th February 2014 at 12:32 pm

    Online advice without human intervention will be a significant part of sales of mortgages, investments, pensions and protection within the next 5 years. The number of people who live their lives connected via a tablet is huge! Not just the youngsters either.
    The internet has revolutionised sales of motor and home insurance and is a significant delivery channel for protection and annuities. What’s more, under current rules these are execution only models so no long term liabilities, as long as the product description is fair and unbiased.
    If the FCA wish to describe ‘Guidance’ as advice, the non human intervention processes will work, and HL have nothing to fear.
    But if real advice is needed, where the adviser tests clients needs, attitudes and direction of travel, from what they think they need (with little training) to what they actually require, taking into account all hopes, aspirations and desires, attitudes etc., I cannot see how algorythms and programmes can take all this information in and spew out advice that can be anything other than basic stuff. For real advice, human input is needed
    So will ‘real’ advice be delivered via face to face meetings, e mail or skype? I guess all three can play a part, but to offer reasonably good advice to the less well off, it may be an answer.
    Perhaps I will now work from home on a skype computer, booking sessions with similarly equiped clients, recording every session and producing a pre-populated report. that’s cheap for me!

  9. The internet will no doubt have a part to play – as will face to face advice. However there are those of us who service our clients and provide advice with very little face to face and no internet DIY. We deal on the phone, by letter and e-mail (even skype!). We provide full reports on recommendations and valuations. In some cases I have actually never met the client face to face – yet I do provide full service advice. In general I would see a new client face to face initially and then hardly at all. Indeed there are some longstanding clients I haven’t seen face to face for 15 years – but I do transact regular business with them.

    If you have a purely transactional business without having long standing clients and you have to ‘prospect’ your clients from the wide world, then I can well see an internet model rather spoiling your party.

    But if you have clients who are somewhat higher worth, who have been recommended by a professional connection or another client and you have clients who are long term and value your advice and are satisfied with your charges then I really do feel you don’t have that much to fear from the internet.
    As someone has said how many use the NHS internet service? Do you do your own tax return on the internet or employ an accountant? I am one of many who still use a full service travel agent. I really can’t be arsed to sit in front of my computer in my time off and fiddle around booking a holiday. And when on those rare occasions things don’t work out right my travel Agent sorts it for me. Worth every penny of the very slight extra cost. Indeed on many occasions she has got me deals that are just not available on the web – and no I don’t do last minute.

    So Nic although you may have a point I don’t think it is nearly as universal as you may imagine.

  10. The problem is not the technology, it’s the way the suitability rules currently work. Asking a computer to make judgements about a client’s overall financial situation is not simple and that’s where problems with suitability arise. Miss something and you’re dead in the water when a complaint comes in.

    Of course on-line advice could and should be available but the way the suitability rules are enforced (by the ‘latest idea’ guidance and variable FOS decisions) makes on-line advice a very real risk for the firm giving it.

    I did post some comments on this last week along with a bunch of quotes from the FSA suitability review – the implication being that on-line advice was unlikely to meet their requirements as they stand.

    The danger for the FCA is that once they accept that advice can be verified as correct by a computer then that’s all that is required – it becomes a science not an art. Anyone who has ever sat down with a client and had a proper discussion about their financial hopes and aspirations will know that is folly in the extreme.

    This is a people business. If you take people out you’re left with business process.

    Last point – NHS Direct is a poor comparison. Whilst it has a ‘symptom checker’ you can’t get any actual advice and certainly not any drugs prescribed. That only ever comes from human interaction for very good reasons advisers, solicitors, accountants, architects, etc. fully recognise.

  11. @ Black Dog: I was testing you to see if you were awake. You are, just. There’s at least one other typo there. See if you can find it.

  12. It’s interesting that you use NHS direct is an example of how online advice could work, the fact is NHS direct is an entry point system meaning that individuals can get limited information whilst being referred to a specialist.

    Bearing in mind that the average reasons why letter from any adviser is approximately 8 to 15 pages long and that’s not including the Key features documents and illustrations just imagine what a full blown on-line advice service would actually generate. Are you actually saying that people would read through all of that information and fully understand what is being recommended without a face-to-face meeting?

    Or are people going to actually just make rash decisions with no doubt disclaimers at the bottom of the advice stating that you cannot sue or even get a signature from a client stating they have fully understood all of the information provided.

    I like many in the profession are not nay says, what we are however is wanting a level playing field and if online advice is going to have what is so-called simplified advice and surely the same should apply to face-to-face advice.

    One rulebook not one rulebook for face-to-face and another given to banks and building societies and online providers is seen to be only interested in maximising profit at the expense of clients and expecting honest working advisers to pick up the bill that their errors!

    At last count PPI is costing in excess of 12 billion just imagine what online advice would cost in compensation particularly if it’s linked to some form of incentive scheme.

  13. Whilst I think Nic makes some good points and it is important to realise how easy it is to become a “dinosaur” , I have to say I think he is completely wrong. Dealing with complex issues and decisions has never been the online market’s strength. Comparisons with NHS Direct are interesting, in the light of the scandals which have arisen recently! Have you got your ear to the ground? The subtlety of the interaction between adviser and client are much underestimated – for example, I have known clients complete a client questionnaire in respect of risk, which then proves to be extremely unreliable in assessing their true feelings, once I have had a discussion with them and outlined some of the implications of their choices. I believe online advice is a route which will result in “misselling” (i.e. people taking out unsuitable products or no product at all, when one is needed) on a scale which has never before been seen in the financial services marketplace. Of course, because of the simplicities of the “system” it won’t look like misselling to the regulator but misselling it will undoubtedly be.

  14. I see I’m coming under some attack over my NHS Direct reference.

    NHS Direct is massively under-resourced for which we can blame both the past government and even more so the current one. It is still not working anywhere near as effectively as it could. It can be improved to a massive degree, to be sure. But even in its present form it has saved the NHS many millions of pounds in unnecessary visits to A&E departments and unnecessary GP call-outs, allowing both sets of staff to focus on providing emergency care to those who need it most. Tens of thousands of users have been helped. And it points the way to the way information can be accessed and basic issues can be resolved online or over the phone.

  15. “And it points the way to the way information can be accessed and basic issues can be resolved online or over the phone.”

    Provision of information isn’t advice Nic.

    Mr Wheatley’s comments made no reference to providing advice on-line or over the phone (which is completely plausible) what he said was “financial products can be sold online on an advised basis with no human intervention”, – no mention of advice here but the sale of products which is why he got short shrift from the adviser community.

  16. ***I should have said “he is completely wrong on the main issue – i.e. that face-to-face advice will die out”

  17. I think that the article is both right and wrong. It is right that many people who are used to accessing information online will do so and self directed investment will become more and more common. however, I also suspect that for many people, the complexity of it all and the effort involved in achieving competence will mean that the advice route is still sought. I can do my tax return online and find lots of information about that online as well. I still employ an accountant though as I value their experience and want to make sure I get it right. this will continue with many people especially those that are making very important financial decisions that will make a big difference to their lives.

    Having said that, some of the online advice websites are really good and as the “logarithms” that underly them all become more complex, then I am sure that they will improve and provide a valuable service for a lot of people. There will however still always be people who haven’t the time or inclination to DIY and will want the reassurance of a qualified expert to guide them through.

    One final point about NHS Direct is that the comparison is both wrong and right. I have young children and have had cause to use the excellent service on a number of occasions. Effectively though, NHS Direct is a triage service. The nurses who you speak to guide you through a questionnaire and if there is any doubt at all will say “go to A&E” or “go to your GP as soon as possible”. Just as in many cases a member of the public isn’t going to need advice from an IFA “pay off your debts”, “take out some life cover”, I think that this may be where online systems let themselves down (or perhaps provide an opportunity) is that if somebody gets to the stage that the system can’t help, then that is when they should be referred to f2f advice.

  18. Let’s face it, most investment advice is already formulaic and tools based, and tends to follow the Profiler/Asset allocation/fund selection/auto-rebalancing format. This technology was being used by advisers on the Selestia platform, on-line, before even broadband was ubiquitous. The regulator’s concerns with shoehorning underlines this mechanistic approach. I’d challenge that most bespoke portfolios don’t need to be, when analysed relative to a suitability checklist. That said, even the vital risk discussion process (eg capacity, ability and need to take on risk) can be conducted by Q&A feedback, and without the “reassuring corporeal presence – I am working on that process already with a supplier. Investment advice, on-line, is no more than 2 years away.

    However, Financial planning advice is a different matter. I can see tax and product rules being coded, and sophisticated scenario analysis being available on line, but as yet I see no technology that empathises, or understands body language and expression, in order to engage emotionally, to strategise or frankly use that great human trait of “common sense”. Here, I think relationship management really matters.

    It is Financial planning where advisers’ real futures lie, ably supported by technology to crunch the numbers. But I’d remind everyone that it is not only ease of use that concerns customers – it’s also about feeling valued, and being given peace of mind. These are harder things to impart remotely.

  19. Nick

    What you’re proposing is not a service that points people towards more appropriate face-to-face services, your article states that online advice could be and should be a reality.

    What advisers are concerned about is not the internet or technology it is those services that purport to be execution only or information only but in reality are advice or perceived advice.

    If we look at the market place at present the execution only services by a well-known platform provider which I won’t name for legal reasons. How many of those individuals took out this plan understand the risk and implications of any transfers or new investments?

    Is not a case of whether advisers are living in the past I for one would like very much to be able to gather data from clients online and instantly have this imported into a back office system (reducing cost). Reality this is not be easy with many of the offerings from back-office providers.

    The reality is that due to the complex nature of historic products and increasing litigation culture it is unlikely that any mass online advice service would be successful. The present information only services offered online are probably the biggest liability to our industry. I personally worked in banking community the late 90s to 2007 and believe me during that time managers were always stating the Banks and regulators can do nothing wrong. So when people with experience voice their concerns today we are not mad or dinosaurs but people that should be listened to, due to the fact we have experience.

    Advice is not going to be restricted to the few if the profession trains many more advisers and the regulator allows an industry to charge fairly for advice. This already works in the legal profession and accountancy profession so why can’t it work in financial services.

    It is interesting that regulators tend to listen to the big players in the marketplace rather than small independent practices with low or no complaints. Compare that to mass market advice!

    Nothing changes in financial services the big boys are the ones that always ask for the rulebook to be adapted to their own ends with no regard to consumers!

    Nowhere in your article did I see consumer interests mentioned.

  20. @ Perter Herd
    Look at Voyant. Client can download a fact find and complete it offline in pdf then send it back and Voyant imports it…love it!

  21. If you don’t think it will be done, it will. If you don’t think it can be done, it can. If you don’t think that this form of delivery channel will grow across all demographics, you may want to rethink. However, the point that is being missed is that there will still be, and always will be a place for a quality F2F proposition. This is not an either or position. You can actually do both and there really is no need to polarise around one or the other. It’s really a question of do I want a slice of that pie as well or not.

  22. @Money Marketing – any particular reason that you are not publishing my comments?

  23. I think most people like to have face to face meetings. But sometimes it is just not practical. Also, for fee based advisers, travelling costs and the time travelling have to be costed into the advice process.

    Surely, delivery from computer to computer ( Skype, email etc) can sometimes help deliver advice more cost effectively to the consumer. Also, there is an argument that this type of advice could lead to better documentation of all stages of advice as it is possible that things can get lost in face to face conversation.

    However, as has been said, it should not be a polarised debate. There will be a market for both face to face and online advice and the market will adjust accordingly.

  24. Abacus test comment from Chrome. Alerts on. First page. 10/page.

  25. Abacus test comment from Chrome. Alerts on. Second page. 10/page.

  26. Abacus test comment from Chrome. Alerts on. Third page. 10/page.

  27. I see there has been some comment about the NHS direct service (whatever that is).
    This is one (of the many) reasons why I will scrimp and sacrifice before I give up my BUPA subscription. (Which I have had for over 40 years). Use the NHS? About as likely as me booking my summer holiday on line or doing my own tax return.

    And so it is with those that are our clients. Well able to do it themselves if they put their mind to it, but they have a day job and a life and are happy to pay us to do it for them.

    As to formulaic advice – well that is nothing short of cheating. If you can’t be bothered (or don’t have the ability) to produce a bespoke and unique advice you are just being dishonest in not just referring the client to the software so that they can do it themselves. What differentiates you from anyone else using the same software? Nothing. You just become a machine.

  28. Ross Aubrey-Smith 21st February 2014 at 12:01 pm

    Abacus QA

  29. There are customers who want to DIY (and on-line investment advice will suit them, and soon), but there are others who have better things to do and are willing to pay someone else to do it. Formulaic advice isn’t ‘cheating’, if it produces a solution that suits the client.

    The idea that everyone needs (even if they can afford it) a bespoke portfolio is like saying everyone ‘needs’ bread baked to order rather than a simple sliced loaf, or a tailor-made suit rather than off the peg. That has more to do with the ego of the adviser, rather than the needs of the customer. Client suitability is what matters – getting the right outcome, not “uniqueness”, or how easy its provision. There’s nothing shameful in providing simple solutions.

  30. If there are comuputer systems that can analyse and interpret thousands of signals a second to adjust and monitor the progress of a satalite millions of miles into deep space for tens of years. Im prettty sure we’ll get to a stage where a system can fairly accurately tell someone how they should invest £3k into an ISA.

    The more it happens the better systems will become and the more reliable the output.

    I do however agree that some people will always want F2F, its the most natural form of communication for those with the money and time.

  31. Graham

    It is nothing to do with ego of advisers but more to do with fairness. Your analogy to the food industry is a good one as the food industry has one rulebook and it has to comply with hygiene standards that are standardised throughout the industry.

    When we look at so-called simplified advice or information only services that purport to give consumers a mass market advice, the word “advice” should not be used. It is made even worse when MAS claims to give “free impartial financial advice” when in fact it’s only giving information that in my opinion consumers find confusing.

    The FCA own rulebook on execution only states that a consumer needs to provide an order for the exact product for it to constitute an execution only sale. Does a decision tree constitute help and if so, should this help be governed by the same rules as an IFA. That is the debate, the industry is having – one rulebook with one interpretation!

    What makes advisers angry is that the FCA and the former FSA seem to not understand that advice is a personalised recommendation anything outside of this should not be marketed as advice.

    It is a bit like mislabelling a beef burger when in fact it’s made of horsemeat.

  32. I am inclined to agree with Peter Herd with his example of decision trees.
    I like decision trees and flow charts as a conecept and computers can easily follow this process. The problem is when it is not a simple A or B or a Yes or No option and when it comes down to opinion rather than facts.
    We deliver a lot of our advice over the phone and by email, but like Harry I like to have met the client at least ONCE and in their own home. I might not see them face to face again for sometime or I might see them every few months, the important thing is “KNOW YOUR CUSTOMER” and a paper factfind or a computer factfind alone with fixed questions will not meet the “KYC” requirements.
    I think someone else mentioned how “risk questionnaires” used in isolation are a big risk to the adviser as clients may fill a questionnaire in which either implies they are happy yo take investment risk or that they are not, when the reverse is actually the case.
    A meeting with clarification of exceptions is needed for advice in my opinion simply to cover the advisers backside. automated systems should remain for “guided sales” and the level of protection for the consumer under FOS and FSCS needs to be reduced with removal of the word advice for “guided sales”. All advice as Peter states should be measured for KYC and suitability in the same way and if the adviser chooses to deliver it by phone, email, Skype or face to face, that is a business decision for the adviser then as to whether the KYC can be sufficiently achieved without a face to face meeting on each occassion.

  33. Providing on-line advice is fine in theory. The problem is not knowing how the FOS will deal with a complaint in the future. If they decide that your system hasn’t done it properly then you face a massive problem because all clients will be affected. That risk is difficult to quantify.

    The current suitability requirements and guidance from the FSA/FCA are not conducive to processed advice. It could be but that requires changes from the FCA. Easier from their perspective to let firms have a go with the rules as it stands and let take all the risk of getting it wrong. Better than adjusting the rules and risking taking the blame themselves.

  34. Matthew 21 February 2014 1:25 pm.

    If it is so easy why did the FSA give up on trying to provide advice in respect of simple products like stakeholder pensions and come up with decisions trees where the ultimate decision still laid with the individual.

    Computers are great at carrying out calculations based on set parameters – unfortunately can they cant tell if a person understands the question they are being asked nor take into account human nature.

  35. As a mere punter, I’m in the mass-market/least attractive client segment. I have chosen my own products and am comfortable with my choices. Where I need help is with investment choices. I would use an online risk profiler and pay a small monthly fee to access set portfolios. I would not put my hand in my pocket to pay the hourly rate for face to face advice. There’s a huge market out there, someone just needs to tap into it!

  36. goodness gracious 21st February 2014 at 3:31 pm

    The biggest worry I have is there are some persons in regulation who think as an accountant does. Put this input in and the same output will be achieved, thus taking out the human element. I am sorry to inform them that life is not like that. We, as advisers ask every question we feel is pertinant, as well as loads that are not, but as we don’t know the answers in advance. But then, who knows when one answer changes the whole complexion of the case, often I think.
    there also is a move to standardise investments, thinking a certain asset mix, developed by accountants, is correct for say Medium risk based on past performance numbers. This too is tick box untruth as we are attempting to predict the future here, it may be successful, it may not be, volatility may be more or less than expected. So essentially investment advice will vary from firm to firm, and there is no proper definition of what constitutes medium risk, high risk etc., nor should there be so.
    So if a regulator recruits a load of accountants from the big firms, there is a risk that people are not advised correctly when a regulator becomes too prescriptive.
    Non human advice will be by its very nature, safe, simple and to most clients, useless!

  37. The FCA seems to be sleepwalking into a potentially larger complaint situation with online advice than PPI. The first incorrect assumption that they are making is that individual customers are financially literate enough to answer questionnaires correctly and tick correct boxes. This may be the case for some people, but in my experience over the last 20 years most clients don’t have a good understanding of financial products or even simple budgeting.

    When we have a medical problem are we suddenly expected to become Doctors via google to diagnosis and treat our self? I wonder how many GPs surgeries are full of people thinking they are suffering from a brain tumor only to find out that they have a headache.

    If you want a gas boiler replaced are you legally allowed to do it without the correct licences? No of course you are not because there’s potential risk to others around you.

    Of course, information and services have a place that they should not be allowed to operate without proper licenses and more importantly not allowed to use the word “advice” because this just confuses the consumer.

    So why it is the financial services is so unique in wanting to put all of the liability on the consumer because that is what we really talking about here. Trying to come up with a clever way of providing mass market advice and putting all of the liability onto the consumer. If that is what the FCA and large companies are trying to do then put that on BOLD print on the front cover and see what the consumer has to say about it.

  38. I think many of you are missing the point with this type of advice, and it is advice – for example, telling someone to pay off their debts is advice.

    This is for clients who cannot afford f2f advice and/or have little to invest.

    If they only have £5k to put in an ISA, do you really need to look in their eyes, probe their deepest thoughts and monitor thier non-verbal signs – or merely discuss risk, term etc. and give them a decent model portfolio?

    In 10 years time when the ISA is worth £75k then they may be more suited to f2f advice.

  39. @ Peter

    Reference the FCA and companies putting the liability on to the consumer, I think the exact opposite is true. The FCA are playing a simple game. The suitability rules are clear. The guidance they have issued is clear. The decisions of the FOS are becoming clearer (but still lack consistency).

    It’s technically possible to give advice without human intervention so Mr Wheatley is correct in what he says. However, when something goes wrong (and it will), do the companies attempting this expect:

    a. The FCA to acknowledge the genuine attempt to do it right and close the case
    b. Quote the rules, guidance, TCF, conduct risk, and require a review and compensation

    Yes, you can do it but the risks are heavily loaded against the firms. You will need to tread very, very carefully with fluffy slippers on.

    It’s nice to see a client commenting in here. But a client has nothing to lose. On line advice in the current environment is a one-way bet for clients. Investment does well, you win. Investment does badly, you complain that your risk wasn’t assessed correctly, you weren’t asked about x, y and z, you didn’t understand, etc. That will work with the FOS most of the time.

  40. This topic seems to have elicited a huge response. In summary after reading through most of the comments it seems that on line information/advice will probably find traction with the mass market who have (so it would seem) been largely disenfranchised. When you consider that the UK average income is around £25k I really do wonder how many advisers have more than 20% of their clients who earn less than twice that amount (taking husband and wife earnings perhaps also into account).

    If this is indeed the case then I can’t understand the excitement as these people never were IFA clients.

    Just as there are people who prefer to have their suits made, rather than buy off the peg, who prefer to go to a delicatessen rather than Tesco and prefer to drive a BMW than a Ford (to use some of the analogies above), then there will always be those who value individual and bespoke advice (provided it delivers!)

    That doesn’t meant to say that an off the peg suit is no good, or that Tesco’s don’t stock decent food or that there is anything wrong with a Ford (some are really first rate!). In the end it’s all about choice. Why drink a £40 bottle of wine when you can get a fairly decent one for a tenner?

  41. If Joe Bloggs wants a DeWalt drill he has a good idea which model he needs and then all he has to do is find the cheapest price, or does he?

  42. I think this is a far more important debate than the Independent v Restricted debate. The FCA should force companies to explain what exactly the clients are doing and paying for i.e. are they taking advice or guidance? They could start by forcing the Money Advice Service to become the Money Guidance Service.

    The premise should be quite straight forward but as usual the regulator complicates the situation by overly regulating some and under regulating others. Should the financial services industry have these badges?
    1 – Product/Information providers only. “INFORMATION ONLY” written all over any documents received so the public is under no illusion as to what they have done. Should probably be the cheapest option available.
    2 – Guidance providers. Again any documentation is covered with the words “GUIDANCE ONLY” and clients are aware that they hold responsibility for the final product taken. Decision trees etc would fit comfortably in this arena.
    3 – Advice providers. Populated entirely by qualified advisers and the only level that can use the word “Advice”. Will most likely be the most expensive option but clients can be assured they are getting an advised service specific to their own circumstances.

    What the FCA then has to do it make sure that the providers/advisers operating in each of the 3 levels communicate effectively to clients exactly what they are doing for that client and ultimately who’s responsibility the decisions are.

    In my humble opinion i think i’ve just fixed financial services but i’m sure someone will disagree.

  43. @Nick Wardle – Good, sensible suggestion. Anyone disagree? Please explain why and if we can all agree with what Nick has said, perhaps we should get MAS (MGS) and the FCA to confirm why they will or will not back a change to something like this?

  44. In summary, the problem is this: Any factfinding exercise on the internet will be, if it is to replace a f2f meeting, EXTREMELY lengthy. I would think 120 – 150 questions a very conservative estimate. It will also be binary in nature. Humans are not.

  45. @Nick Wardle – You may not have ‘fixed’ financial services, but it’s more than a starter for 10. This is effectively a blueprint for an FCA consultation paper, and I for one would be more than happy to give it independent support…

  46. @Graham – I was being a bit (very) tongue in cheek with that comment, there is no broad brush that will “fix” financial services and create a utopia of client engagement instantly but sometimes the answer doesn’t have to be a new set of complicated rules. I think the FCA needs to figure this out more than anyone else.

    A simple set of rules for all providers that are then enforced by the regulator will do more to improve the publics perception of the financial services industry than anything RDR has attempted. The key is that the public understands the rules, at the moment they haven’t got a clue, once they understand they will have a better ability to decide who they use to engage with financial services by choosing from either the execution only, guidance only or full blown advice routes.

  47. Posted this on another thread and just thought it was relevant.

    What is confusing for the consumer is not the process of giving financial advice, it is the individuals who pose to be qualified to give that financial advice.

    Do a simple search online for financial advice and how many websites you come across that are glorified marketing firms selling data onto regulated companies. Is it no wonder why the consumer is confused after all there is no regulation according to the FCA for setting up a website and collecting data on the promise of providing financial advice. In my professional opinion this is covered by the FSMA 2000 and the FSMA 2012 but the FCA seems to think that it is an exempt service under journalistic rights. Of course this is total claptrap and I’m afraid this is the FCA running scared or just simply not doing its own job clamping down on online activity.

    If you would point me towards the sections of the FCA handbook that allows a so-called financial planner to carry out a pension review up to stage 1 to 4 I’d be interested to see it because I thought any personalised recommendation or process was regulated!

    I’m not talking about a one line in the rules that may or may not give exemption. I am talking about the spirit of the rulebook and trying to get back consumer trust of financial services because it sure as hell hasn’t achieved that in the last 10 years of regulation thanks to turning a blind eye.

    More importantly who pays the compensation when these so-called guidance services get it wrong because they sure as hell don’t pay any FCA fees. Oh I forgot it’s the adviser category that pays the compensation when they go bust.

    Maybe it’s about time we had a degree of fairness in the system and if this type of guidance is going to be allowed than these guys need to pay their fair share of the fees.

    Even is not registered with the FCA!

  48. Quote: “Trust me on this: if IFAs fail to make use of McKenna’s ideas and experience now, they will regret it in 10 years time.”

    Time, not just over 10 years, is indeed one of the most important factors to be considered in this debate, changes occur over time, an individual’s circumstances change over time, and for me that seems to be the achilles heel in any adoption of computer generated “advice”

    Three simple examples will I hope illustrate my concern.

    Is it safe to assume that within the variety of algorithims we might see (there could be many variants) there may be some common questions, such as:

    “Are you married?” – to which the answer is Yes.

    “Are you employed?” – to which the answer is Yes.

    “Do you have children? – to which the answer is No.

    The affirimative or negative answers to those questions will allow an algorithim to move to the next stage(s).

    Time passes …

    a year later the client has children,

    three years later the client becomes self employed,

    and ten years later sadly ends up divorced. (The latest statistics (published December 2012) estimate that 42% of marriages in England and Wales end in divorce)

    Quote: “Trust me on this: if IFAs fail to make use of McKenna’s ideas and experience now, they will regret it in 10 years time.”

    Trust me on this: Advice, based on an algorithmic conclusion based on current circumstances, and which cannot forsee or adapt to change as time passes will be the cause of many regrets.

  49. It all comes down to choice. If you want to deliver F2F – do it. If you want to go down the D2C route – do it. If you want to do both – do it. It’s a choice that you make, just he same as a client makes. Each delivery channel has it’s upside and it’s downside and it’s wrong to think that people who buy through D2C delivery channels are less competent and knowledgeable than those who seek F2F. Just this morning, a major player has announced a D2C for ISA’s. It’s going to happen.

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