This week Heather Hopkins (@heatherahopkins) Head of Research at Platforum, discusses robo-advice and human interaction – a topic that will be discussed at “Platforum 2015 – The Retail Investment Conference” on 1st October 2015. 

We have extended the deadline to get the early bird rate for our annual Platforum conference, produced in association with Aegon UK, so we thought we’d take this opportunity to discuss some of the topics on our agenda and to shamelessly plug our event. A few of the sessions at the event will be on the evolution of advice and how digital is driving change. This is an area of particular interest for me as I have spent my career between financial services and digital engagement.

There has been much debate about the role of robo advisers and whether they will displace financial advisers or fill the advice gap – or both! Our view is that robo advisers will be used mostly by financial advisers rather than the mass market of investors and that robo advice will help to fill the advice gap by reducing fees for advice.

Let me back up a bit to provide the context for this view.

The importance of brand and reach

In the US, where we’ve seen the strongest adoption of robo advice, the numbers are still relatively small among the start ups. The Economist did a nice piece on FinTech a few months back that included an article on robo advice. The article includes a chart (image below) on assets held by robo advice providers. Wealthfront, established in 2011, had $2bn in assets as at February 2015. Second ranked Betterment, established in 2008, had $1.4bn.

Schwab by contrast launched robo advice in Q1 of this year and in the first 6 weeks the service had $1.5bn in assets and in results published this month, the service had $3bn at the end of Q2 with 39,000 accounts. Wow – what a difference brand and reach can make to scale.

In our regular surveys with consumers and investors we ask about the factors most important in selecting a platform. “A well known and trustworthy brand” consistently comes out on top – beating price by a wide margin. Schwab has the brand and reach to attract the masses but it also has something else – a human being to back it up.

Human support to back it up

Another factor we believe is important for success of robo-advice is the human support to back it up. We know most investors take a blended approach – taking both advice and going self-directed.

We believe we will see a similar pattern with robo advice. Most investors are happy to manage their investments themselves but will want to check in with a real person from time to time. Often this involves checking in to make sure the plan makes sense with a real live person – as well as to get some support and guidance on the decision.

In conjunction with a financial adviser

In the US much of the take up of robo advice has been among financial advisers. These tools, slick as they are, can still seem intimidating to your average investor. As soon as you start discussing risk rated portfolios or asset allocation, it can all seem a bit too complicated.

Robo advice offers a terrific opportunity for advisers to improve productivity and reduce fees. This will help reduce the advice gap.

So back to the shameless plug – come debate this issue and more with us at our annual conference on 1st October. The early bird expires in one week… We will be debating the role of technology and digital engagement in delivering advice and what impact it will have on financial advisers and financial advice. Adrian Grace CEO of Aegon UK will be speaking about re-shaping consumer access to, and engagement with, retail investments. We will also debate vertical integration and the future of platforms, income solutions for drawdown, the future of regulatory reform, how to get funds on platform &c.

Hope to see you there.