Now it’s all about robo-advice, a growing theme for online investment and savings

The term is difficult to agree on, but fundamentally it’s about replacing (and the tricky bit is where in the sales process) face-to-face advice with online full or partial (“assisted” robo or “cyborg” as some are naming it” – already getting confused?) automation.

Basically it’s a suite of algorithms that determine your outcome/selection based on your screen inputs.

What’s triggered this is a market view that there’s an “advice-gap” where many people need advice, but can’t afford it or don’t want to pay for it. Another more cynical view could be it’s a mass production at low cost with the buyer led to a predefined solution, which hopefully won’t be abused (by the hidden algorithms sitting behind it) and lead to another miss-selling review.

The average person generally can’t afford to get advice (or doesn’t want to pay even if they should or can) for their investment or pension, which in some instances is a highly technical area, especially in the area of final salary schemes.

This is basically what robo-advice is all about. Complete an online form with your personal circumstances and let the algorithm determine primarily the investment solution/product. This could vary platform by platform and many are now entering the market. Some, if not all Banks, will almost certainly utilise these tools for their customer base.

There are concerns over automated advice

There are industry concerns over robo and this is also echoed by the regulator who want to ensure that the customer is looked after correctly.

One concern is the question – is it really “advice” or merely “guidance”. The lines and definition between advice and guidance can often be blurred. Guided sales may not take into account the full range of objectives and goals and changing circumstances over your lifetime.

Many customers may find themselves directed into portfolios that might not be suitable, especially if there is a limited number of say 4 or 5 model portfolios. One of these has to fit you in.

However, the reality maybe for most people anyway, is that they would fit into a range of the same portfolios whether robo or face-to-face, but now at lower cost.

Also, the younger generation is much more familiar (and comfortable) with online and may find it easier to use. This may encourage them to start saving and investing earlier.

In the end, I suspect 10 years from now or sooner, terms used to describe this form of investment will be dropped and the mass users (excluding some of the wealthy) will simply purchase their investments, pensions and health solutions online as a matter of course!

I’ll be back!