What are robo-advisers and can they ever replace IFAs?

While it might sound like a plot line from a bad science fiction movie, robo-advisers could be about to revolutionise the financial advice sector. But can an automated service ever really replace the reassurance of meeting with an Independent Financial Adviser?

So what exactly is a robo-adviser? Well, forget the notion of an artificially intelligent cyborg with a knack for figures. Robo-advisers are in actual fact an online wealth management service that provide automated, algorithm-based portfolio management advice – without the involvement of human financial planners.

A recent article in the FT Adviser reported that a start-up that wanted to enter the automated advice space would be required to ask consumers 247 questions to comply with regulation and that the government and Financial Conduct Authority (FCA) had promised to develop a ‘sandbox’ for innovation in this space.

Complement rather than a threat

Robo-advice should be seen as a ‘complement’ to established financial advisers rather than a ‘threat,’ comes the advice of Personal Finance Society chief executive, Keith Richards. Speaking at a recent FCA conference about robo-advice, Richards said that many firms had already incorporated automated elements into their advice process anyway.

I think it’s a complement rather than a threat to regulated advice,’ he said. ‘We do have a challenge in the UK that people aren’t necessarily waking up and down the street looking for an adviser. We do have some barriers to interest from profile, to affordability to accessibility.

What robo-advice offers, argues Richards, is a portal for people to access basic financial advice through an automated process and then become ’embedded’ within a regulated service from an IFA.

Never replace the role of advisers

Old Mutual Wealth customer director, Carlton Hood, is rather more outspoken with his views. He states that Robo-advice – and the emergence of banks entering the retirement advice market – will never replace the role of advisers, despite them increasingly moving into the advisory space, and are more a way to close the advice gap in the market.

“If we look at the advice gap I think that is going to be closed anyway by some direct robo-advisers and possibly also by banks, but I don’t think banks will be ever be able to, or want to, provide the level of service support that an adviser can give. I don’t think they’ll ever replace the role of advisers,” he told delegates at the Platforum conference in London recently.

What do you think?

We would love to hear your opinion on this. Would you consider accessing basic, non-regulated financial advice through an automated service? After all, automation has already transformed the insurance industry. Go Compare and Compare the Market are obvious examples of this case in point.

But would you trust an automated service with your financial details – no matter how basic? Can you ever really beat the comfort and reassurance of speaking to a qualified IFA; someone who can listen and respond to your needs in real time, face to face?

Do let us know, we’d be fascinated to hear your response!

To discuss your financial matters with one of our dedicated team please contact us today on 0151 520 4353 or email info@acumenfinancial.co.uk.