Are tech-savvy advisers killing robo advice?

By Dave Chessell

Go to the profile of PortfolioMetrix
Jul 25, 2019

Recently, Money Marketing reported on the difficulties being experienced by the robo-advice providers. It’s a topic I raised a couple of months ago in a blog but it’s worth revisiting, not least because a stat featured in the article estimates that 27% of advisers have incorporated some sort of online or robo advice into their business.

Perhaps it’s just me but is the terminology being used perhaps muddying the waters of what robo advice actually is?

Online is more than robo advice

A quick look at Wikipedia for a definition of robo advice/robo advisers yields this: “a class of financial adviser that provide financial advice or investment management online with moderate to minimal human intervention. They provide digital financial advice based on mathematical rules or algorithms.” Are over a quarter of advisers really offering such a service? I find that rather hard to believe.

Online advice should not be confused with robo advice. Digitisation of services is becoming the norm but for the majority of financial advisers, leaving the selection of investment portfolios purely to an algorithm is not something that sits easily.

Advisers using robo for entry level clients

Some advisers are adapting and using tech to provide appropriate options to different segments of clients. Robo advice may well be appropriate for family and friends of existing clients who may not have the need to pay for full financial advice. Advisers who are using tools that keep their name at the top of such services are wise to ensure they stay in the loop, with the ability to jump in as and when there may be need for them to provide more extensive services.

However, although this sort of service is available, I do find it hard to believe it accounts for more than a quarter of advisers.

Model portfolios are the majority choice

Far more common is the use of model portfolios to meet client needs but the involvement of the adviser in the selection of the appropriate portfolios is still very much at the fore.

The time and expertise required to manage investment in-house has led to the availability of myriad model portfolio solutions. These can often be accessed online by the end clients, so I guess it can be termed an ‘online’ service.

Perhaps the difficulties being experienced by the true robo advice services are because traditional advisers are becoming far more savvy about using tech to deliver different types of solutions for different types of clients.

With MiFID II and PROD regulations requiring a far more segmented approach to investment advice, it’s natural that advisers are looking at digital solutions to help them comply. Algorithms can only go so far, especially for those clients who have significant assets and changing lifestyles to support.

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PortfolioMetrix are a multi-award winning, innovative investment manager that provides independent financial advisers with an alternative way to access discretionary investment management for their clients. Our proposition comes at a competitive price and doesn’t compromise the adviser/client relationship. The London winner of the Citywire Wealth Manager Regional Stars award for two consecutive years, voted the WM Small Business of the year, in association with ARC 2018 and, in 2019, have received the accolade of PA Discretionary Manager of the Year. Our proposition offers the convenience of online model portfolios yet delivers customised portfolios, tailored to individual client requirements. Investment performance has demonstrated consistent and reliable risk and return separation of portfolios that doesn’t undermine the financial planning process. This is achieved through our academically-robust, risk-based investment approach. WealthExplorer™ is integral to the PortfolioMetrix customised service. A proprietary owned and designed software system, WealthExplorer™, is purpose built to equip advisers with a broad range of tools designed to deliver unique client insights that add value to the adviser/client relationship and ultimately delivers better client outcomes, when utilised by financial advisers.

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