The other day I came across the new words added to the Oxford English Dictionary in 2016: scrumdiddlyumptious, slacktivist and Foggy Bottom (I kid you not) are all there. But the word I was expecting to see – robo-advice – was not. Surely one of the most used terms in financial services this year, it cannot be long before it earns its place in the official lexicon.
That said, the term is pretty much a US one, with almost everyone I speak to in the UK disliking it. Even the Financial Advice Market Review report does not refer to robo-advice, using “automated” or “streamlined” advice instead.
Nevertheless, much has been debated about its potential threat to traditional advisers, with many commentators concluding it is not really a danger at all. But this is where I would raise a note of caution.
Traditional advisers are currently in a purple patch, with demand for advice on the up. So much so, many are having to turn clients away, simply because their asset value is not high enough to warrant the full cost of advice. It is easy to sympathise. If a business is busy with older, higher asset-owning clients, it is tempting to focus on the now and not worry about what the future may hold.
However, the biggest threat to the traditional advice model is not robo-advice per se; it is advisers who recognise the power of embracing technology. It is those who operate a hybrid model offering a mix of digital and face-to-face services. It is those who are embracing what the FAMR is trying to achieve.
This includes having the capability to provide services to the already wealthy through to the aspirational millennials starting out on a journey to wealth but who do not yet have the means, or appetite, to pay for a full planning service.
Operating a digitally driven hybrid model is not all about attracting younger, less wealthy clients, though. One of the great misconceptions about digital services is that older clients do not want it. However, a look at the data of Intelliflo clients using digital services for their clients shows the single biggest age demographic is people in their 60s.
In some ways, this is understandable. Clients in their 60s are more likely to be retired and have more time on their hands. They are accessing Facebook and they Skype or FaceTime to talk to their kids and the grandkids. They are increasingly tech savvy and expect the people they do business with to be so too.
It is also interesting to note the RBC Cap Gemini World Wealth Report in 2014 found that 65 per cent of advised clients around the world said they would fire their adviser if they were not to offer their services to them digitally in the following five years.
The clock is ticking but evidence is building that those advisers using a hybrid model of automated, digital services alongside traditional face-to-face advice are reaping the rewards.
Nick Eatock is executive chairman at Intelliflo