Last week, the Financial Market Authority (FMA) announced it had opened applications for brokers and insurers seeking to offer personalised digital advice to their clients through digital platforms.
Under the current reading of the Financial Advisers Act (FAA) only a natural person may give financial advice - but reform to the is expected to come into force in 2019, which will permit digital guidance. Until then, the FMA will allow financial advisers, insurers and other financial institutions the opportunity to apply to rely on its exemption powers and provide advice to their clients via an algorithm.
In this article, Aim Financial Services broker Mark Miller discusses digital advice and the impact he thinks it will have on the industry.
What do you think about robo-advice/digital advice?
I’m a big advocate for robo-advice/digital advice. The potential benefits for consumers and the advisers are significant. Giving greater access to advice will make for a more informed and better protected public, and advisers will have increased capacity to offer more detailed advice.
With that said, I’m nervous for supporters of a carte blanche approach to robo-advice. Every client and every transaction has subtle nuances that, for now, require human interaction. The combination of humans and technology working together is powerful – significantly better than humans and technology working in isolation.
How do you think it will impact the industry?
At Aim, we consider the immediate advantages to be minor – largely time saving on mundane questions or data entry. But I believe the advantages will begin to progress quickly, especially as the public becomes more familiar and comfortable with digital advice.
Those advisers prepared to entertain this (step) change will be successful. If they can grow with the technology and help shape it for a three-way win (consumer, supplier and the adviser), their businesses will thrive.
Will Aim be applying to the FMA to use digital advice?
Yes, and we’re excited to be.
The FMA thinks digital advice will level the playing field, what are your thoughts?
In the medium term, no I don’t think the playing field will be levelled. Those clients who take the opportunity to work with an adviser and receive solely personalised advice should get a significantly better level of service than those who only use digital advice. While the access to services will be greater, we at Aim don’t feel the technology will be quite as good as a dedicated adviser.
Longer term however, I absolutely agree that digital advice will level the playing field. As the intelligence of the algorithms increases, we’ll certainly see consistent, high quality advice, regardless of the platform. It will then be up to the individual to decide who or what to interact with.
What do you think is the most important part of the client, adviser relationship?
The cliché response to this question is trust – it’s a vital component in the client/broker relationship. The whole purpose of the client/adviser relationship is to allow the adviser to draw on their knowledge and guide the client to achieve the client’s goals, and empathy can be a powerful tool to help gain trust, especially when dealing with complex and emotional situations, like family finances.
For more complex policies personalised advice from a broker is invaluable, but for more generalised insurance advice an algorithm could work for a lot of consumers. This is a good thing, right? Giving more people access to financial advice?
The “round the water cooler” discussions at most adviser events is that robo-advice is coming but it will never be able to replace advisers’ abilities to identify the risks and opportunities every different client presents.
While Aim shares some of that sentiment, we see an opportunity for nearly every client to have some sort of robo-advice experience, coupled with personalised advice. This will produce efficiency and accuracy as well as meet increased compliance requirements.
Certainly, clients with rudimental requirements could have a completely digital/robo experience, especially to provide basic advice. But there is merit in having the backing of an experienced adviser to provide tailored “wrap-around” support which should not be underestimated.