Many IFAs Regardrobo-advice
As A Competing Challenge. But How Can That Be Turned On It’s Head?
It is an undeniable reality that robo-advice will become
more and more widely available and used by a bigger and bigger percentage of
the retail investor world. It is therefore of critical importance that IFAs
look to work with this emerging trend rather that fighting the inevitable.
How can this paradigm shift be leveraged by IFAs as an
opportunity to diversify their revenue stream whilst at the same time improving
their service that is offered to clients?
For advisers, the addition of a robo-advice service working
in tandem with their existing more traditional business model can deliver a
number of synergies.
Robo-advice can act as a scalable channel to access
potential clients that will require ‘in-the-flesh’ IFA services further down
the line when looking at inheritance, buying a house and planning for
retirement as just 3 examples. Banks already use this model but an IFA
robo-offering will allow advisers to compete.
The ‘advice gap’ and the risk of ‘orphaned’ clients is as
big a headache for IFAs as it is for the investors themselves but a robo-advice
solution provides an efficient method to address the issue. It is no surprise
that regulators across the world are very much behind the sensible use of
robo-advice services to solve this specific problem.
Robo-advice is not always limited to those with a smaller
investment portfolio. There are many high net worth investors whose 1st
priority is to ensure that annual fees are minimized in their efforts to
maximize their portfolio performance. An adviser providing a robo element to
their service can position this as a differentiating USP giving clients or
potential clients a wider choice than competitors.
Many IFAs are likely to be daunted by the unknown levels of
investment and resource required to add a robo-advice service to their existing
proposition. However, there are turnkey solutions now available that provide
the IT and the access to proven fund management solutions that the IFA can
white-label quickly and at low to no incremental marginal cost. I will be examining
some of the options in blogs to come.
Robo-advice is nowhere near a point where it can justifiably
claim to be able to replace the role of an IFA. And even at some point in the
future, if this were a technical possibility across the complexities of
pensions and tax planning etc, there is no technology that could ever replace
the requirement for personal expertise and the human touch. However now is the
time where IFAs who add an intelligently selected robo-advice offering to the
services, may be able to steal a march on their competition and turn a
regulatory and admin nightmare into a significant revenue stream.
