Robo-advice didn’t take over the financial advice industry as once predicted, but the acceleration of digital practices due to the COVID-19 pandemic has re-shaped hybrid advice models with a human adviser touch still required at the forefront, according to a whitepaper.
The ‘Reimagining financial advice’ whitepaper from Altus Consulting in partnership with Ignition Advice said the best applications for digital solutions was to “enrich rather than replace” the human adviser process.
As the amount of advisers in the industry continued to decline, existing advisers would be needed to service a larger client base.
It was also likely that practices might struggle with staffing as new entrants to the industry were coming in at a slow pace.
Mike Giles, Ignition Advice chief executive, said the remaining advisers should think of digital advice as a junior adviser which was there to help organise and simplify the process allowing the human element to be saved for when it was better suited.
“One thing [digital advice] does a good job of doing is how to triage people up the tree,” Giles said.
“It doesn’t mean [digital advice] is going to replace full-service financial advisers, it’s meant to be an augmentation.”
Although the whitepaper was centred around the UK financial services industry, the same principles applied in Australia.
“A lot of the traction we’re seeing in the UK is still coming from the big financial institutions that have large retail customer bases that need guidance around specific decisions they’re trying to make,” Giles said.
“An area where it’s a bit different in the UK is the regulator there has actually been very strong at giving guidance and best practices in this area.
“In our own markets here, everybody is not that clear, even though the same process is completely possible and it’s all completely within the regulations.”
In the whitepaper, Sam Turner, consultant for Altus Consulting, said since the COVID-19 pandemic attitudes towards the use of digital capabilities had shifted among the financial planning community.
“Enforced use of relatively simple digital capabilities has revealed how these tools can enhance the advice process both from an efficiency and a customer experience perspective,” Turner said.
“Whilst the technology being adopted only scratches the surface of what is possible, this seemingly minor attitudinal change has the potential to act as the catalyst for profound change across the sector.
“This leaves the advice industry poised for a significant digital transformation. Banks, life companies and smaller propositions have developed or are introducing hybrid advice models, while the suppliers of digital advice software solutions are refining their configuration and implementation models to enable swift, flexible delivery.”
Turner said the conclusion of the research was that the adoption of digital advice solutions would enrich, rather than replace, the traditional advice process and would accelerate over the next five years.
“But a word of warning. The industry is littered with the remains of time-consuming, costly programmes which were undertaken simply because everyone else was doing it,” Turner said.
“Do it for the right reasons. Your reasons. And selecting the right partner is key.
“Partnering with an organisation which brings specific industry expertise, along with the necessary flexibility to adapt to changing internal and external factors can help the business adapt and grow, both now and into the future.”