In the last six months, “robo advice” has become a genuine contender in the personal investing landscape. But lurking in the shadows is a much bigger threat to IFAs’ future…..and that’s our collective failure to reproduce.
I’ve been monitoring the robo advice space for nearly eight years now. Until now, it was hype, theory and belief. But in 2017, it really has started to bite into the market.
From speaking to consumers coming through VouchedFor, about 1 in 10 now mention Nutmeg. Their significant brand spend is starting to translate into genuine traction. Speaking to venture capitalists and the robos themselves, my mental calculations suggest they now have 5-10% of the DIY investing market, by client volume.
And while advisers can rest assured that today’s robos typically only deal with simple investment needs, the young geniuses in various start-ups across Shoreditch are already working on Artificial Intelligence (AI) that replicates the entire financial advice process. After all, if AI can beat Chess Grand Masters, surely it can conquer the Level 4 syllabus, which the PFS suggests can be learned with 360 hours’ study?
Don’t start worrying just yet
As exciting as that is, I can’t see much need for established IFAs to worry. By the time robos get to grips with the complexity of retirement advice – and earn the trust of the older generation – most of today’s IFAs will be retired.
Moreover, I believe there’ll always be demand for at least as many IFAs as today. The more technology evolves, the more the market will grow. Still today, the vast majority of the public bury their heads in personal-finance-sand. If technology can motivate them to look up, there’ll be significant opportunity for IFAs to either help consumers drive the tech, or deliver more customised or complex personal services.
The immediate threat to IFAs is the lack of fresh talent coming through. This has really hit me in the last six months. We’ve launched various pilots, aimed at either attracting new talent into the profession, or helping them rapidly accumulate clients.
The biggest learning is that while roles are increasingly available (even including a few where you don’t need to be pre-qualified with a client bank ready to import) – relatively few people are looking for them.
With five years passed since RDR, the profession is just starting to re-grease its recruitment wheels. But faced with a dried-up candidate pool – and a very pro-tech new generation – we will require fresh ideas, along with significant marketing and education, to replenish the flow of people considering a career in financial advice.