The Financial Conduct Authority has published the results of its survey of firms providing financial advice. The results make for depressing reading.
Of the sample, 72% of firms said that customers’ preference for personal interaction with an adviser was a ‘very important’ or ‘important’ barrier to providing automated or technology-supported advice
The FCA were seen as part of the problem
In terms of very important barriers to providing ‘mass market’ advice, the majority of firms (63% and 61%, respectively) stated regulatory factors, such as fees and levies, and the cost of compliance with FCA rules and reporting requirements
and the FCA found
A relatively small proportion of firms (11% or less) expected that, over the next year, they would increase their mass-market, low-cost advice proposition or the provision of generic advice.
As the Irish joke has it,
“if you’re looking to go there, I wouldn’t start here”.
Supply side/buy side – not exactly aligned!
Have a look at this infographic , taken from a YouGov survey commissioned by People’s Pension earlier in the year.
The news for pension advice is not encouraging. At best advisers are being used as a “Shop and Go” service , at worst they are ignored, very few customers return for regular reviews,
Infact Pensions with 36% attracts less interest in financial advice than mortgages where 46% of the 2000+ surveyed said they’d taken advice.
Financial adviser’s face to face service, for all their protests (see above) is not as popular as the advisory websites such as www.moneysavingexpert.com.
Research and Development
When I go into offices of my company, actuaries are keen to show me financial modellers which they are developing in their own time, and turning into apps. We fire Survey Monkey surveys between us asking what we think about all kind of financial matters and the results are turned into ideas that drive our financial education programs.
The Pension PlayPen is an example of what happens when an advisory firm, such as First Actuarial , empowers staff to develop technology suitable for the mass market of consumers (in PPP’s case the 1.8m employers staging auto-enrolment).
In my opinion, the drive to deliver mass market advice, the holy grail FAMR is seeking, won’t just come from a top-down approach from Government, but from the bottom up.
The people (like me) who have been allowed in our firm to play with the new technology, are some of our most committed and exuberant employees. Not only are they driving forward the direction of our company, but they are profit producing in everything else they do.
Re-addressing the balance; developing on-line help
The YouGov/People’s survey did not paint a black and white picture. Clearly many people are not going to take advice from machines and the “strongly disagree” element of those surveyed suggests that many never will!
However, if I was investing into financial advisory businesses right now, I would see the needs of the greens less served than those of the reds.
Firms that are investing for the future in delivering to the mass market using technology have a bright future if they can turn this latent need for on-line help, into a lasting revenue stream.
As with social media, monetising the tools delivered for free is the hard bit, but as with social media, daring to innovate and capture the eyeballs of ordinary people, has the greatest potential.
“Innovate or die”
I cannot see a great future for financial advisors unless they can innovate, re-connect with the mass market and be seen as good for society in general.
Most of the R and D in this area is not coming from advisers but from asset managers, insurers and banks.
The average of an IFA in the UK today (according to the FCA) is 58. I fear many will die before they innovate.