Digital Advice Platforms: Self-build, off-the-shelf or licensing model?

Digital advice has moved along the adoption curve from being the sole preserve of innovators to the point where increasing numbers of early adopters are getting in on the act. A number of factors point to this trend accelerating – a regulator actively forcing the pace of change – the FCA’s dedicated Advice Unit within its Project Innovate initiative had 19 initial applications to the regulator for digital advice propositions - at least four high street banks unveiling robo plans, and a growing number of active launches from robo-advice firms. 

Consumers are moving too, in the US at least. Figures from Capgemini show that in 2016, 68 per cent of US high-net worth individuals would consider having a portion of their portfolio managed by an automated service, double the 34 per cent who said they would in 2015. Yet a poll of 100 UK advisers published this week by Cicero Group found just 28 per cent have plans to launch a digital proposition within the next two years. 

While many are still in do-nothing mode, for those early-adopter advisers looking to shape the future to their advantage, the robo question is moving from ‘if’ to ‘how’. 

We may get providers offering robo solutions to advisers in future, but for the moment it seems the options on the table for advisers are self-build, buy in off-the-shelf, or a licensing model. 

Self-build seems a tall order for most advisory firms, unless there is someone in the organisation who is a technology expert and a pile of cash to fund the project. Even if there is, building from scratch is not going to be straightforward and getting a process validated to the satisfaction of both the regulator and your professional indemnity insurer is going to be an arduous process. 

So most advisers will be looking at an off-the-shelf or a licenced solution to taking their digital service to the next level. With a growing number of options on the market, of which Wealth Wizards is just one, what should advisers be looking for? 

Cost is clearly going to be an issue –advisers will have to make the calculation of comparing the monthly/annual cost with the time saved in delivering advice to their existing book plus the growth in their client base they will likely achieve. This will not be a straightforward calculation, as advisers making the transition to digital should use the process to carry out a root-and-branch review of their entire business proposition. 

Efficient use of time is a key driver of adviser profitability, and working out the parts of the advisory process that robo functionality can be used for full-service clients will reap productivity rewards in the long term. The compliance standards of the robo service will obviously be at the top of the adviser’s checklist, while a quality risk profiling process and audit trail should come as standard. Going forward most customers will expect 24/7 portal access to real-time valuations and these sorts of softer functionality features, as well as screen-scraping aggregation services and personal financial management tools will all help advisers meet the engagement potential of offering a smooth customer experience through a digital solution. 

With high street banks entering the digital advice space and workplace pensions offered by employee benefit consultancies delivering a single-screen view of an individual’s entire finances, advisers will need to ensure their customers’ journey is also rich. Advisers will also want to make sure the partner they choose can adapt to their own particular approach to investment. That means flexibility in offering investment strategies, whether the adviser’s in-house strategy or outsourced investment solutions bought in by the adviser. 

Often a licensed solution allows for flexibility and the ability to adapt. That root-and-branch review of the adviser’s business will also involve deciding what the digital offering is there for – is it principally there to lighten the load of delivering a fully-advised service or as a low-cost option for seeding a bank of future clients currently with insufficient assets to profitably serve? 

Will it be advised or non-advised, and what area will it most usefully operate in - pension accumulation, pension decumulation, protection, straight investment or a combination of these? Perhaps most important of all will be choosing a digital advice partner that shares the same philosophy of advice as the adviser. Like any relationship, it is essential to join up with a partner that shares your values.