Greg Neall: What has happened to robo-advice?

I worked in robo-advice for 10 years. In 2016, we had a publicly available website where a retiree could get an automated recommendation on whether to buy an annuity or take a FAD. In 2019, I was giving defined benefit transfer advice based on a machine-learning algorithm.

Five years on, both these systems are either dead or barely used, yet I seem to be surrounded by people telling me that technology is going to revolutionise the advice industry. Really?

I see the advice gap widening, not closing. I see lots of start-ups selling to the advice community, but none giving advice and capturing recurring revenues with their tech. We now have a progress gap; robo-advice has gone nowhere in five years.

An adviser may be able to dictate into a mobile telephone on the golf course and have an avatar deliver the advice while teeing off; an adviser may be able to get a suitability report written in 10 seconds by a large language model and increase profit by laying off a paraplanner. But are more people actually benefitting from advice?

My observation is that huge efforts and large sums of money are being committed to making advisers more efficient, enabling more communication and making the tech stack talk to itself more. This will increase profitability and improve work-life balance for advisers, but do nothing to provide advice to the millions of unserved consumers.

We now have a progress gap; robo-advice has gone nowhere in five years

By my estimate, there are around 35 million people in the UK with financial products and services outside the state system, and around one in seven are being served by the advice industry.

Advisers average 150-200 clients each (if you believe they are all being served), so let’s say each adviser can double the number of clients served, with all the new tech around. That still leaves an untapped market of over 23 million people.

For someone who believes that technology can and must provide better financial service to the person in the street, I find the progress made in the 15 years of robo-advice to be shameful and embarrassing.

There are several reasons for this. Regulation is tricky and I hope that targeted support may help. Build cost is large, around £20m over three years to get to market with an advice engine. But, for me, the biggest challenge is that financial behemoths control the pace of change.

Slow progress is in their interests because it keeps the cost of advice high, while more efficiencies can be found. Paying to build an online advice engine to be used by the masses, however, commoditises the service and brings in unwanted competition.

Until we have systems giving actual advice, the advice gap will simply widen, the robots will be staying in their boxes and the tech will only serve to make more money for advice firms.

Greg Neall is chartered financial planner at Wake Up Your Wealth

Comments

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  1. What has happened to robo-advice is the same as what has happened to the FCA’s FAMR.

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