“Digitisation will demystify their craft and erode their competitive edge,” said independent think tank, Create Research.
Conducted on behalf of BMO Asset Management, the research pointed to the rise of the ‘robo-adviser’, in which personalised online advice platforms, such as UK-based Nutmeg, are built using a small number of exchange-traded funds (ETFs).
It said this could create a significant competitive advantage because ETFs are “low cost and suited for slicing and dicing the investment universe”.
Although the study said digital tools can increase transparency, educate investors and offer “a better basis for building relationships”, it also said there was a wide belief that existing asset management models and advisory channels were “not up to the task of attracting the new generation of clients”.
Digital tools, such as “virtual mobile advisers”, were said to appeal to the mass affluent – as well as those lower down on the wealth ladder – therefore posing a “distinct threat” to intermediaries as they remove part of the value chain.
However, experts have said the rise of digitalisation should bolster the advisory business rather than threaten it.
Vice-president at Sapient Global Markets, Jarlath Forde, said technology could be used to automate repetitive tasks, which would mean IFAs could take on more clients.
“Financial advice is still a business based on people,” he said. “Digital platforms are about empowering people, not about offloading services onto the client.
“If your business cannot use technology well, that usually says something negative about your brand.”
Richard Preston, chief executive of global wealth platform, Ardan International, agreed.
“Advisers are powered by technology,” he said. “Platforms can put the adviser at the centre of the client’s world, which means they can deliver a much better solution.
“Even though clients are being better educated, planning for the long-term is still a skill.”