Advisers with UK-domiciled clients living and working abroad are usually managing a significant amount of assets and delivering sophisticated financial planning solutions.
If this is you, you could be forgiven for thinking a feature about people using a robot to choose direct investments without the help of an adviser is not relevant. Bear with me.
While the risk of your clients opting out of the investment advice you provide may be slim, at least in the short to medium term, the availability of automated risk-profiling and portfolio delivery services presents some interesting opportunities.
Where are the benefits?
Harnessing this opportunity will help strengthen and grow the relationships you have with existing clients while also planting valuable seeds for the future of your business.
The growth of automated advice systems that offer investors access to equity-based portfolios is gaining pace.
In the UK, companies such as Nutmeg, Wealthify and Moneyfarm are investing heavily in major marketing campaigns flagging their low fees and ease of use to people who typically don’t have access to equity investing.
Low bank interest rates are pushing on an open door in terms of attracting people who are fed up with their savings not even keeping up with the UK rate of inflation.
The level of knowledge about investment options among these firms’ target clients tends to be low.
This, together with the fact that most of these platforms do not take potential investors through an attitude to risk process; they don’t ask questions around debt and suitability; and they’re not configured to turn people away if they aren’t suitable, makes them a questionable route for investment success.
Also important is that these investors are not protected in the same way as they would be if they took advice from a qualified adviser. Effectively, they are on their own.
The robo-advice demographic
What’s this got to do with you? Your clients are not in this demographic. That may well be the case but what about their families, grown-up children and their partners for example?
It is likely your clients are related or close to many people who are not in as comfortable a financial position as they are themselves.
Their extended family may well fall into Theresa May’s ‘just about managing’ or ‘Jams’ category. They want to save for the future but don’t have the resources to attract the support of independent financial planners who could help them maximise their modest means.
This group was highlighted in 2016 in the UK government’s Financial Advice Market Review report, which flagged a savings gap, with a lack of options for people who do not need, want or can’t afford personalised qualified financial advisers.
Utilising automated platforms
During 2017, Intelliflo worked with a number of advice firms to create their own automated advice systems, enabling them to meet the needs of investors who want the protection provided by an adviser-backed service.
We were responding to advisers who are looking over their shoulders at what the large product providers are doing.
Our automated advice platform is designed to be superior to the Nutmeg and Wealthify models, providing a configurable advice process that incorporates attitude to risk and investment projection, and links to a suite of risk-rated default investment solutions.
Importantly, all investments are made via an adviser’s branded website and they carry the protection offered by using a financial adviser. Advisers have the ability to view all transactions and to configure-in ‘stop scenarios’, restricting what the client can do and allowing the adviser to intervene and provide specific advice if necessary.
This renders the service suitable for all types of people: employees of corporate clients; non-actively serviced clients or new clients that require a direct investment route.
Advisers with wealthy clients and who have their eye on the long-term growth potential of their businesses, either for themselves or for selling on at a profit to others in the future, are seeing the potential in harnessing technology and segmenting their clients accordingly.
It is relatively early days but those financial advisers who are able to respond quickly to the opportunities offered by automated advice systems will, I firmly believe, gain the most in terms of cementing existing client relationships plus growing their client base for the future.
Case study: Kymin Financial Services
Newport-based Kymin Financial Services was one of the first financial advice firms in the UK to launch its own ‘robo-advice’ service, enabling people to invest in stocks and shares Isas or General Investment Accounts without the need to first meet with any of their advisers directly.
The service, Kymin Direct, gives people with between £1,000 ($1,300, €1,130) and £50,000 to invest access to options that meet their specific appetite for risk. Transactions can take place at any time of the day or night and direct from a home computer or mobile device.
Robin Hall, managing director of Kymin, believes the service sets his advice firm apart from others and enables him to open up investment options to people who are currently at the mercy of bank and building society low interest rates.
He says: “The savings gap has been well documented, with a lack of options for people who don’t need or want the personalised service offered by individual qualified financial advisers.
“Our service offers a step-by-step, easy-to-use system that automatically identifies the sort of financial risk suitable for each person, with an appropriate investment solution recommended as a result.
“For people with £50,000 or more, the system offers back-up advice from our team of fully qualified advisers at the touch of a button. It has the comfort factor built in, which we believe makes it superior to standard online services.”
Kymin Direct, powered by Intelliflo technology, enables people to take advantage of tax-free savings via Isas in the current tax year, while opening up access to regular savings throughout the year.
Three Asia focused robo advisers compared
By Nick Eatock, executive chairman, Intelliflo