Most financial advisers now believe a hybrid of traditional face-to-face service combined with elements of robo-advice will be the future of the financial advice industry, according to a survey.
Octopus Investments, part of the Octopus Group, conducted a study exploring 275 UK financial advisers’ views on the outlook for the country’s advice market.
Three quarters (76%) of advisers polled said a hybrid tech/financial advice model will be the future.
An even greater proportion (81%) also indicated they believe that the next generation of financial advisers will have to incorporate aspects of robo-advice into their offering.
Cost/benefit analysis
Around 74% said they believe that accessing financial advice online will become a key channel for younger clients to seek financial advice in the future.
Advisers also cited other benefits with 44% expecting technology to help free up their time to better service clients, while 36% said it will encourage competition.
Only a small proportion of advisers took a negative stance.
Just one in ten (13%) said robo-advice distracts from the core face to face advice proposition, 11% said it doesn’t offer a tailored service and 7% said the risk profiling it offers is too imprecise to be useful.
Jacqueline Lockie, head of financial planning at Chartered Institute for Securities & Investment, said: “It’s clear that investor habits are changing, as the next generation of adviser clients comes through.
“Millennials have different communication preferences with a tendency to rely more on technology and information online.
“However, research has found that young people are still big fans of human interaction and relationship-building, which is key to developing trust.
“This is why a hybrid model, where face to face advice – underpinned by smart technology, will be key in the future.”
Changes
While most advisers think integrating an element of digital advice will be integral in the future, many have already begun making changes.
Over a quarter (27%) of advisers surveyed said they had incorporated some form of online advice into their business, with a further 57% actively considering it.
Just 16% said they had no plans to introduce any form of robo-advice.
Ruth Handcock, chief executive of Octopus Investments, said: “As many advisers clearly recognise, technology will play an increasingly important role in the future of financial advice, and there are some obvious benefits for the industry.
“Yet for most people, a smart online interface with some risk profiling is not going to replace the value of a financial adviser.
“Our financial lives are deeply interwoven with our personal, professional, and family lives, which are rarely straightforward.
“When making big life changing decisions, we need someone who is able to listen, build trust, and empathise with our goals.
“Advisers know this better than anyone. The real opportunity lies in combining that human touch with smart technology.”
Could the fee structure change too?
With traditional advice fee structures under increasing scrutiny, advisers were also asked whether they thought a subscription model, in which customers pay a fixed monthly fee to access advice, would be adopted in the UK.
Three quarters (77%) of advisers said they believed the UK financial advice market would eventually be run on this model.
Although the majority (60%) of these advisers said it would take five years or more to happen.
Only 11% of advisers said the UK would never be run on a subscription model.
