Most people forget the third part

Panacea comment for Financial Advisers and Paraplanners

20 Jun 2017

Most people forget the third part

We started the week with this statement from the Lloyds Banking Group on behalf of HBOS:

‘Our customers’ safety is of paramount importance to us’: 

‘We have a clear policy that if a customer says that they are considering taking their own life that we must take the statement seriously and take action to protect them. 

Whatever your view of Noel Edmunds and Mr. Blobby may be, I cannot think of any example in my forty plus years in the financial services industry where any bank has ever made such a statement.

It is made worse in my humble opinion because any organisation that makes such a statement, especially via a spokesman, never actually means it. They are so detached from the pain they have caused and in apologising for that, their words simply make matters worse.

Lloyds is not alone, in fact they are quite low down the scale of stock messages of faux regret and condolence.

This month has seen a positive 12 bore load from politicians in particular and if we look back over the year, they have been supported by fading celebs needing a publicity boost, trade unions, regulators various, civic leaders, minority interest groups, broadcasters (BBC) and others of the so called society ‘elites’.

Top phrases used to sound good but little else at the moment are, in no particular order:

  • “Our hearts/ minds/ sympathies go out those affected by this…(fill in the blank)”.

This is a hijacking of an equally irrelevant use of the words, originally used by the military to describe a counter-insurgency policy of various governments. Essentially focused on “community outreach” in times of good versus evil conflict, it is now used in reference to emotional and intellectual support or commitment by those in authority to assuage them from their own inactions that probably caused the very thing they are ‘reaching out to’ empathise with.

Why bother with this type of statement, after hearing it so many times this month alone, from so many, it is devalued to the point of having no meaning at all other than a useful intro line to demonstrate faux empathy that is just not genuinely there.

  • “Lessons will be learned”:

This is sometimes linked to the word “Learnings”. NATO has a great definition of this. “The purpose of a Lessons Learned procedure is to learn efficiently from experience and to provide validated justifications for amending the existing way of doing things, in order to improve performance, both during the course of an operation and for subsequent operations. This requires lessons to be meaningful and for them to be brought to the attention of the appropriate authority able and responsible for dealing with them. It also requires the chain of command to have a clear understanding of how to prioritise lessons and how to staff them.”

A perfectly clear definition, but the reality in UKplc today is that the statement made and the realities of it are travelling in polar opposite directions.

Lessons are never learned, never implemented and personal responsibility is never fully identified, defined or the guilty made accountable.

“I deeply regret”:

A very popular phrase in touchy, feely UKplc, it is a very useful phrase in the apologising person’s verbal arsenal because it doesn’t require you to admit you did anything wrong, at all, ever. In fact the use of this phrase would simply be another way of saying I really could not give a…SHoneT.

“Mistakes were made”:

For those who feel that “I deeply regret” is admitting just a little bit too much responsibility, they can ‘upgrade’ at no extra reputational cost to “mistakes were made.” This is the zenith level of non-apology, used at the very highest levels of government. Prime Ministers like Tony Blair, David Cameron and now Theresa May have used the words. These are seen as better than “I deeply regret” by not only leaving it open whether they are actually the culprits, but also existentially questioning whether there even is a mistake?

I saw a great definition of ‘sorry’ recently. It said that “Being genuinely sorry is actually remembering what the hell you did and having enough genuine regret to sincerely endeavour not to repeat the very thing you know has caused distress or even great hurt”.

The source went on to note,When someone’s on your back like Zorro to apologise to you, or for you to accept the apology, they don’t actually mean they’re sorry. 

What they really mean is :“Look, can you hurry the ‘f…’ up and accept my apology so I can stop feeling bad about it? You perceiving me as (wronging/hurting/abusing/whatever- insert again where appropriate) is terribly inconvenient and my ego doesn’t like the pinch of reality, so if you don’t mind, get a shuffle on, accept my apology and let’s move on so I can slam my palm down on the Reset Button.

It would be great if those making these vacuous public pronouncements could come up with an original, heartfelt message of their own, one that sums up how they genuinely feel and not statements recycled to simply sound good, boost their own fading profiles or to kill off a reputational firestorm.

Better still, just shut up.

We’ve got to start thinking beyond our guns- those days are closing’ fast

We’ve got to start thinking beyond our guns- those days are closing’ fast

When contemplating the future of the financial advice industry, I can’t help but be reminded of the late sixties movie The Wild Bunch. Set in 1913 Texas, the film follows an ageing gang of outlaws looking for one final score as the traditional American West disappears around them.

Substitute the slow motion, multi-angle view of the world in 1913 to that of 2017, where our industry practices are on the cusp of potentially drastic change that could create uncertain future. Virtual reality now prevails, technology is king and in our world the day of the robo- adviser is nigh. But while I wouldn’t want to compare today’s hard working advisers to the dramatic personalities of The Wild Bunch, there’s an undeniable parallel between these characters facing retirement and some troubling figures around the future of the financial advice sector.

 

The current age demographic of the industry, based on our community analysis above of some 18,000 is certainly veering toward the older generation. New entrants to the industry as at Q4 2016 were lower that Q4 2015*. To make matters worse the number of advisers de-authorising in the same periods exceeded those joining*.

It may not come as a surprise that the number of financial advice firms currently being set up in the UK is also falling, with just 334 businesses authorized by the FCA in 2016 according to an FCA Freedom of Information request. It’s not hard to see a link between these dwindling numbers and the lack of fresh business ideas that is often brought about by bringing young talent into an industry.

Barriers to new entrants can be many and varied. Cost is a primary factor, especially for those looking to start a new business. From June this year the new minimum capital resources requirement of £20,000 comes into force.

For most smaller, established, firms it will be based upon the greater of £20,000 or 5% of the previous years’ income. This is in effect dead money and based on the £20,000 minimum, new firms would need to have a minimum year one potential turnover approaching £400k to warrant the lock up of this money.

Fees for a new firm add up quickly, freeze the £20k then add in staff costs, office costs, professional fees, technology, marketing. Possibly followed by an FSCS call. And then comes the need to find a paying client.

If you are moving from an established firm it is highly likely that there will be contractual restrictions placed upon you regarding client ownership and possibly a geographical restriction along with a time based one.

Put bluntly, all of this means that those seeking to create a new business are betrayed by the sheer cost imposed upon the entrepreneur, the ambitious, the wealth builders of the future by regulation. Rather like The Wild Bunch gang, our industry could well be on the precipice of extinction altogether. Is it any wonder then that we’re struggling to attract younger generations to the financial advice sector?

* Statistics based on Equifax Touchstone analysis of our database and CF30 FCA data

88% of Advisers would not use an outsourced Paraplanner

Nearly nine out of ten advisers say they prefer to employ a full-time paraplanner as part of their in-house team instead of turning to an outsourced paraplanner, exclusive research from Panacea Adviser has revealed.

The survey of just under 90 advisers asked if advisers consider outsourced paraplanning an attractive option for their firm, to which 88% responded to the contrary that they currently favour having a paraplanner on board as a permanent member of their in-house team.

Less than 1% of advisers surveyed said they would consider outsourcing paraplanning in the future.

We believe that the Retail Distribution Review (RDR) expedited the already expanding nature of the Paraplanner’s role and made them a ‘must have’ resource for many smaller advice firms looking to maximise their earning potential.

Against this backdrop, we might have expected to see a sharp uptake in demand for both in-house and external resources, something which makes the lack of popularity surrounding outsourced paraplanners in our latest survey a somewhat surprising result. However, in our opinion, this does not suggest that outsourced paraplanners somehow have less to offer than their in-house counterparts, they just need to do more to shout about the time saving and other benefits that outsourcing can bring to adviser firms.”

INDUSTRY VIEWS ON PARAPLANNING

The research also gathered opinions of both paraplanners and advisers, highlighting some of the key challenges – and benefits – that using this type of external resource can bring for advice firms.

Nathan Fryer, Director of outsourced paraplanning firm, Plan Works, said:

“I can fully understand why advisers would be apprehensive about outsourcing work of this nature to a third party. In many ways if I were advising myself, and could afford it, I would most likely look to employ a full-time paraplanner too. After all, inviting a stranger into what is quite often an adviser’s “life work” can be bewildering. 

“It’s this that makes communication so key when it comes to outsourcing, explaining why many outsourced paraplanners actually offer a bedding in period for the two parties to get to know one another and identify how they can work together.

While it is also true that having someone in-house can assist with other tasks such as admin and marketing, paraplanners are actually becoming increasingly few and far between, which means that salaries are also being pushed higher and higher.” 

Morwenna Clarke, CFP from Portland Wealth Management, also commented:

“We actually have a successful outsourcing relationship with a paraplanner at present but, in the past, we have come across issues around data protection when outsourcing.

“It seems that some outsourced paraplanners contracts don’t cover the legal issues around protecting and storing customer data, which could potentially see the adviser breach certain European laws. Another issue that may deter some advisers from turning to an external paraplanner is the changing definition of what constitutes a ‘worker’ under UK law, which may make it difficult to work with an outsourced paraplanner.”

As with every element of your business, it is important to ensure when working with a third party that the proper data protection licences are in place and that advisers work closely with their outsourced paraplanners to identify secure ways of communicating and storing data. This should help overcome some concerns that advisers have around using outsourced paraplanners.

Panacea Adviser provides opportunities for advisers and outsourced paraplanners to connect via its Paraplanner Directory and at no cost.  Here, outsourced paraplanners are able to include business details and links to their own website – allowing them direct access to Panacea’s 19,000 strong community.

For more information on the Paraplanner directory please click here. 

Happy 30th birthday Big Bang

Regulatory comment for Financial Advisers and Paraplanners

26 Oct 2016

Happy 30th birthday Big Bang

It was the great Gordon Gekko who said, “Moral hazard is when they take your money and then are not responsible for what they do with it.”

With these words of wisdom, I felt it might be time to reflect upon the fact that 30 years ago, on 27 October 1986, the closeted clubby world of the City was subject to a positive tsunami of changes that today, for those of us old enough to remember it, was called the “Big Bang”.

I was working in the City at the time and the financial services world, as we knew it changed forever from that date. The late starts, long lunches, early finishes were no longer fashionable, everybody started dressing like Mr. Gekko, huge mobile phones were ‘hand borne’ not hand held, the colourful LIFFE boys would strut their stuff around the Royal Exchange between trades and generally life seemed to have a very particular and agreeable buzz.

Over the past 30 years what was once a rather staid gene pool of public school chums in pin stripes, a veritable gentleman’s club of friends and relatives, had morphed into a US-stylisation of business practices.

With it came the skyscrapers of Canary Wharf and the City all linked with the considerable diversity introduced by foreign banks as plus points, but, the downside was that it came with a certain killer instinct that would mean even your friends and colleagues were not guaranteed a particular benefit without a cost attaching.

But in the post big bang world, as Mr. Gekko would say, “if you need a friend, get a dog”.

Regulation and financial services have not always been easy bedfellows yet upon reflection the world did seem a nicer, gentler place in many ways in the years building up to that 1986 Big Bang.

Social media did not exist then. What led to Big Bang was that the London Stock Exchange was coming close to, if not actually being found out without the enhancements of Google searches.

The stock market was really an almost regulation free (when compared to today) cartel, fixing commissions and linking this with trading floor admission complexities that would do the Royal & Ancient some credit.

It was a posh, gentlemen’s club version of the old London markets of Smithfield or Billingsgate- but with manners.

We saw a closed shop for the benefit of brokers and stock-jobbers all safely contained in their pin striped, bowler-hatted bunker which in the coming brave new world of class and professional barrier deconstruction would not be seen as acceptable any more.

Margaret Thatcher had been in power for some 7 years and the Thatcher vision of wealth creation by way of the state selling the public something they already owned was underway.

She was warned pre big bang, that this vision would lead to a new culture of ‘unscrupulous practices in the City‘, according to a release of government papers in 2014.

Her Cabinet secretary Sir Robert Armstrong said that a ‘bubble’ was being created that would be pricked” and “that corners were being cut and money made in ways that are at least bordering on the unscrupulous”.

But despite the warning, we still “Told Sid” and the nation rode a gravy train of expectation with flotations of once staid mutual institutions like the Halifax and Abbey National building societies- yes, remember them?

The merchant banks were in gorge mode on these flotations. SG Warburg, Schroders, NM Rothschild, Samuel Montagu, Hill Samuel and Morgan Grenfell were there doing it “very large”.

US investment banks like Goldman Sachs and Salomon Brothers (remember them too?) were also keen on some action but leading up to Big Bang it was not too easy for them to get into the club.

But change was on its way, the days of fixed commissions and closed shops were being replaced by the need to be competitive.

The City was no longer a place for “Gentlemen and Players.”

It was becoming a world of young and thrusting ‘spiv’ market traders who had literally switched venue, being recruited from the perceived ‘low rent’ market environs of Petticoat Lane, Billingsgate, Smithfield and Covent Garden.

And those guys brought their trading skills and “Loadsamoney” culture to the previously hallowed ground of the City and the Stock Exchange.

But now they worked, shouting in trading ‘Pits” or shouting at banks of computer screens waiting for that big deal, greeting it with more shouting and of course the resulting huge bonus moment.

The big success story of Big Bang was Warburg’s swallowing up of Ackroyd and Smithers, Rowe & Pitman and Mullens & Co who in turn were swallowed whole by UBS, then UBS/Phillips & Drew/Swiss Bank empire.

In the feeding frenzy Barclays paid huge money indeed for Wedd, Durlacher and de Zoete and Bevan, Deutsche Bank ate up Morgan Grenfell, Midland Bank (who are they) bought W Greenwell and this then got digested by HSBC. Kleinwort Benson bought Grieveson Grant, and NM Rothschild, Smith Brothers.

And what of the “Gentlemen and Players”?

Well they all retired to their stockbroker belt houses and country estates swapping pin stripe for tweeds, having “trousered” some very serious money.

With this sea change we saw the disappearance of those traditional and cautious values, my word is my bond, trust, nods, winks and tips were all to be replaced by what is now seen in many quarters as a reckless abandon, using somebody else’s money to trade on your own account for the benefit of the Banks who employed you and more importantly yourself.

If it all went wrong, the bank carried the losses until, as we saw with the spectacular 2007 banking collapse, the taxpayer did if nobody else seemed interested.

So when the indigestion disappeared from this bout of Mr. Creosote like fiscal gluttony, was Big Bang a success, was big beautiful?

Sir Robert Armstrong had the correct vision and Gordon Gekko I think has proved to be the master philosopher. The banks, post big bang, did take our money and were not responsible for what they did with it.

The largest banking fine in history levied this year has shown only too clearly that for rogue traders, in Gekko speak, “there is a very big difference between rehabilitation and repentance” and as far as casino banking and regulation is concerned, there is some way to go on both counts.

This would never have happened in the world of ‘Gentlemen and Players’?

Just a thought.

 

Tattoos and the workplace

hirefireNow I do understand that as the generations roll on, standards and expectations in business do not always meet with what would have been deemed acceptable in my younger days, but after my recent meeting with my new business banking relationship manager, something appeared very wrong in the world of banking and possibly elsewhere.

Tattoos are not everyone’s ‘cup of tea’ and it is a sad fact that they can, in extreme cases, give an impression that may quite unfairly, not match with the individual’s actual personality, capability, lifestyle or knowledge.

Self-expression for ‘my generation’ by way of ‘inking’ was once strictly reserved for south sea islanders, bikers, teddy boys, the military and the criminal classes. Today it has found its way into the boardroom. Men and women equally seem to exercise some poor ‘placement judgment’ at the tattoo parlour as the nations low literacy skills present ‘inkers’ difficulties in getting the spelling right as the big new danger.

According to ACAS “About one in five British people are thought to have one, and they’re most popular among 30 to 39-year-olds, with more than a third admitting to being inked and one in ten people in the UK are thought to have a piercing somewhere other than their earlobe”.

They go on to note that according to a recent study this particular practice is “extremely popular among women aged 16 to 24, as almost a half (46 per cent) are alleged to have a non-earlobe piercing.”

Although the ‘blue collar’ world is loosening up, not all ‘white collar’ financial services firms, large and small across the UK are ready for studded and inked employees since it’s only recently that tattooing and piercing have become so very mainstream.

Indeed, most small businesses I have spoken with do not have an ‘inking and body art’ policy in place.

Dress down Friday has not yet been replaced by ‘ink up Monday’, or has it?

I am not sure what image anyone these days is looking for in a bank manager but I would suspect that putting Captain Mainwaring to one side, one would perhaps expect a sense of some form of ready for business etiquette by way of dress, a certain understated sense of business interest, professionalism and enthusiasm.

It may be that todays employers are so ‘hog tied’ by human rights and political correctness that staff who are in customer facing roles can turn up for work as if they were either off to the pub with their mates or have just come from the pub and have not had time to prepare themselves for what pays the salary.

My new banking relationship manager was around early thirties, he was scruffy and had an enormous dark blue ‘Polynesian style’ tattoo extending the length of his arm to below his wrist, what may be elsewhere was best not contemplating.

Putting aside any prejudices, is it so wrong to expect that even in today’s world of more casual business standards, anyone in a financial services customer-facing role representing their employer should at least look the part?

What message is conveyed to a firm’s customer by the sight of a heavily inked, pierced thirty something individual who is there supposedly to represent his corporate employer in dealing with your best business interests?

Tattoos are for life it would seem but are they for business life? Many large employers have policies that do not allow visible tattoos. Depending on the employer’s industry and the type of job, this may make sense.

Does your firm have any ‘inking’ policies in place? Have you experienced any negative customer or staff reaction relating to tattoos either as an employer or as an “inked employee’?

 

www.panaceaadviser.com

Regulation, will we ever get it right?

mansleepingI had the great fortune to sell my IFA practice 10 years ago, a driver for taking the plunge was that having worked under the ‘control’ of 4 different regulatory regimes- NASDIM, FIMBRA, PIA and FSA, the prospect of never seeing a balance of common sense and fairness painted a very bleak future.

The jury may still be out in that regard, but I think we are at the stage where the Judge may be directing the Jury that a majority decision would suffice.

I am not normally driven to negativity, cynisim maybe, and while I do see an absolute need to have regulation of financial services, it seems to me that wherever there is regulation, chaos and extreme cost is the outcome with blame being laid at the door of the weakest.

Some key facts to digest:

  • Regulation is poorly thought out in just about every industry
  • It is reactionary rather than pro-active
  • It is not always retrospective, although in financial services it seems to be an exception
  • Nobody ever listens to the voice of experience
  • Nobody ever learns from past failings
  • Nobody in regulation admits failure
  • Nobody in regulation takes the blame
  • Everyone in regulation benefits from ‘learnings’ and earnings
  • Regulatory failure is rewarded not punished
  • Regulation is an industry, it is hermaphroditic, capable of self procreation and without something to bash it would have no purpose. As Keith Richards (Rolling Stone not PFS) once said “In the business of crime there’s two people involved, and that’s the criminal and the cops. It’s in both their interests to keep crime a business, otherwise they’re both out of a job.”

 

Regulation should not be pursued at any cost and in such a way, applied like a tattoo only to be regretted when the effect of the alcoholic induced stupor that fuelled its creation has gone away. The NHS is an example of regulation on ‘acid’.

Has the consumer benefited? Many may say no. Access to financial advice for the masses has been exterminated. Even if it was freely available, there is insufficient capacity to service any more than around 10% of the population based on the recent Heath Report and the FAMR will not correct that imbalance as was intended.

In 2009 the great and the good expressed concerns about the impact of RDR and how it will disenfranchise consumers, here but just a few to prove my “Nobody ever listens to the voice of experience” comment

  • Otto Thoresen – CEO ABI, then of Aegon: “The RDR is only helping wealthy customers”
  • AXA April 2009: “We will lobby the FSA to make sure the RDR does not mean less are able to access advice”
  • Institute of Financial Services: “RDR will impair financial advice before improving it”
  • Alasdair Buchanan Scottish Life November 2009: “Sales advice is a real cop out and extremely confusing to investors”
  • Stephen Gay – Aviva June 2009: “The regulator has failed to consider the danger of adviser charging limiting access to advice for those on lower incomes”
  • Lord Lipsey: “Consumers in the middle (not high net worth or money guidance fodder) to be sold products by banks under the contradiction that is sales advice”
  • Walter Merricks former Chief Ombudsman: “I think it would be unwise to count on the assumption that complaints from the retail investment world are suddenly going to go down as a result (of the RDR)”
  • Deutsch Bank report August 2009: “There has been industry talk of 30% or even 50% of IFAs exiting the industry post 2012, which is not impossible”
  • Paul Selly HBOS: “Bancassurers set to benefit”
  • Richard Howells Director Zurich Life June 2009: “The big question mark is still around what benefit it will have for the ultimate consumer. I am still not convinced that all of these changes, when you sit down with a consumer and explain them, actually give rise to a consumer benefit that I can really hang my hat on.”
  • Martin Lewis Money Saving Expert June 2009: “There’s a worrying possibility that the FSA is about to kill off independent financial advice in the UK for all but the wealthy. I do hope I’m wrong. I’m not convinced most people will want to pay for advice. The commission route has the advantage that you don’t pay a fee each and every time you want information; you can go without the worry of laying out cash. What I find most galling though is that bank-based advisers – those primarily responsible for PPI miss-selling, endowment miss-selling, investment miss-selling and generally poor advice all round are still to be allowed to be remunerated based on the number of sales.”
  • Janet Walford OBE, Editor Money Management Sept 2009: “I am not paranoid enough to believe that the FSA has a hidden agenda to do away with small IFAs, but the law of unintended consequences may well mean that this will be the result. This is especially the case when set alongside the myriad of other proposals that are costing some £430 million to set up, with ongoing fees of £40 million pa thereafter, a mind boggling amount of cash.
  • Peter Hamilton barrister, Source: Money Management Oct 2009, Scrapping the FSA by Marie Jennings MBE: “The Financial Services and Markets Act does not permit the FSA to cancel an authorisation simply because the FSA has changed its views on what the appropriate qualifications should be…. It is one thing to impose new rules for new entrants to the IFA profession, it is quite another thing to disqualify someone who is already qualified.”
  • David Hazelton of Tax Incentivised Savings Association (TISA) 30/10/09: The RDR could be detrimental to consumers both in terms of higher product charges and an increase in the cost of advice, warns the Tax Incentivised Savings Association (TISA). Implementation costs for the RDR are being “seriously underestimated” and product charges will consequently have to be raised.
  • Robert Kerr, head of retail distribution development at Scottish Widows says: The RDR could have the unintended consequence of “disenfranchising” the majority of consumers from financial advice. “Our key concern is the RDR proposals will act to drive advice upmarket, with financial advice becoming the preserve of the wealthy leaving mass-market consumers un-served,”
  • Nigel Waterson MP when Shadow pensions minister: “While no-one can object to raising the standards of training and competence, should an emphasis on exams take precedence over on-the-job training and experience?

Fines are at record highs for the same bad behaviour from the same suspects, regulatory costs are at an all time high, huge FSCS levies continue to hit ‘small businesses’ when least expected, politicians have no control of those they leglislate to regulate, those employed in financial services regulation have increased, those employed in the financial services sector they regulate have decreased.

The problem with regulation in 2016 is that you cannot regulate for lack of common sense, yet that is what we keep trying to do. Caveat emptor has gone.

We have lost the use of that in-built gene of common sense when looking at constructing and applying regulation.. Its loss went along with map reading skills, crossing the road after looking both ways, not talking to strangers, proficient cycling, spelling ability, simple mental arithmetic skills and very many more.

The world has truly gone mad, or at least it has in UKplc’s regulation section.

We have a society that is now readily and speedily offended on somebody else part for just about everything that simply should not matter as much as it does.

We have borders that are not fit for purpose, we have an NHS in meltdown because the service is now aspiration and expectation based, rather than focusing on the basics of it’s original 1948 founding principles (comprehensiveness, within available resources) and a country controlled not by UK based elected politicians but by unelected civil servants, quangos, eurocrats and regulators.

To top that we now have ‘Brexit’.

To borrow that famous Bob Monkhouse quote “ When I said that the proposed RDR regulation would not work, everybody laughed. Well they’re not laughing now.

 

www.panaceaadviser.com

Panacea Adviser survey: 89% of advisers say Robo-Advice is a threat to the industry

Almost nine out of ten financial advisers warn that automated services pose a threat to traditional face-to-face financial advice, research by Panacea Adviser has revealed.

In a survey asking 118 financial advisers whether robo-advice presented a threat or opportunity for face-to-face advice, only 11 per cent described it as a positive for their industry while the vast majority raised concerns that robo-advice could prove damaging to traditional financial advice.

Commenting on the results of the research, Panacea Adviser Chief Executive Derek Bradley, said: “With the amount of attention and industry debate sparked by robo-advice, it is perhaps not so surprising to see such a strong reaction from advisers towards the ‘rise of the robos’. The current mood appears more unusual, however, when you consider that automated services still represent a relatively small market here in the UK while the technology itself is also fairly limited at this stage.

“The US market also offers a glimpse of what looks like a more positive outlook for advisers when it comes to robo-advice. The ability to combine elements of both human and automated advice is actually seeing many traditional advice firms in the US prove more popular than robo-advice models that rely solely on technology.”

ADVISER VIEWS ON ROBO-ADVICE

The research also gathered adviser opinion on both sides of the debate, highlighting some of the key challenges – and benefits – that automated models can bring for advice firms.

Pete Matthew, Managing Director for Jacksons Wealth Management, believes marketing could prove the biggest hurdle for firms looking to adopt robo-advice. He said: “An online service can provide a way of perhaps serving ‘lower value’ clients in the short-term so that they engage with the adviser’s brand, which may well lead to higher-ticket business in the future.

“But while the technology behind robo-advice actually appears to be straightforward enough, the real issue is that most advisers are clueless when it comes to marketing. The world of marketing has changed immeasurably. Now, it is all about providing value to the prospect by educating, entertaining and inspiring clients to take action. The social aspect should not be underestimated either. Increasingly people buy based on the recommendations of social media circles and unless advisers are influencing within these channels, no-one will show up to their fancy robo-advice websites.”

 Alan Hughes, Partner at Foot Anstey LLP, also calls for the FCA to clarify what constitutes ‘advice’ and ‘guidance’ in relation to automated-models. He said: “As robo-advice develops, advisers need to consider carefully how it impacts on the market, what that means for their own business and clients and how they can use this as an opportunity. Robo-advice will never completely replace face-to-face advice but it is a case of “ignore at your peril”.

“Going forward, any further clarity that can be provided on the difference between advice and guidance will be very useful in bringing automated models to market. The FCA should explicitly address these issues and be proactive, rather than just tweaking the regulatory framework and then telling firms that they need to go off and reach their own view.”

Focusing on the regulation of automated services, Derek Bradley added: “A vital UK consideration that would assist in the adoption of robo-advice models is that the FCA approves the technology and their complicated algorithms. Some time taken now could mean that the constant retro aspect of regulation against products or advice is removed and public confidence in a ‘fit to fly’ model will see a greater, quicker embrace by advisers and of course the public.”

 

www.panaceaadviser.com