GlobalData Plc

FCA on board for automated advice in the UK

The Financial Advice Market Review (FAMR) has concluded that the FCA and the government should act in order to bridge the advice gap in the UK. One of FAMR’s recommendations calls for the development of digital automated advice platforms.

While HNW clients can benefit from a wide variety of advice services from their wealth managers, less affluent individuals are in a worse position. Consequently, according to our 2015 Global Retail Banking Insight Survey only 33% of individuals in the UK hold any investments, and 42% of investments were arranged without any professional help. Retail clients either can’t afford or can’t access advice, for example if their main banks have minimum thresholds that are too high.

Among many recommendations on how to address this problem, FAMR has suggested that the Financial Conduct Authority (FCA) should establish a dedicated unit (as part of Project Innovate) to help financial services providers develop automated advice offerings. Use of technology can increase cost-efficiency for banks (RBS’s recent decision to reduce staff numbers proves this point), and robo-advisors are cheaper from the users’ perspective as well.

Yet while FAMR’s recommendation in light of the above makes sense, it is nothing that competitors don’t know already. RBS is only one example, as other high-street banks are believed to be developing digital automated propositions. The real challenge is educating retail customers about investments, as our research shows that most self-directed UK investors believe that managing their portfolios is simple. HNW clients will withstand potential turmoil on financial markets, but less affluent individuals should learn about long-term investment goals.

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