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Vanguard finds advisers split on robo-advice

Two-fifths of UK wealth managers believe robo-advice offers the potential for greater efficiency and to attract new clients in the next five years, according to a survey from Vanguard.

Vanguard finds advisers split on robo-advice

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However, the same amount of respondents (40%) said they viewed robo-advice as a threat to their business. The remainder said there would be no impact to their business (7%) or they were yet to form an opinion (15%).

Significant hype

Janine Menasakanian, head of wealth for Vanguard’s UK business, said, “The advent of the robo-advice age is creating significant hype and so it’s not surprising that wealth managers are considering the impact over the long-term.

“What we do know is that technology is here to stay, so wealth managers will need to consider how to embrace the advantages of technology while still emphasising the personal, trust and relationship-based parts of their value proposition.”

Regulatory sandbox

Earlier this month, the Financial Conduct Authority (FCA) set out plans for a ‘regulatory sandbox’, in which firms could test ‘innovative products, services, business models and delivery mechanisms’ without immediately incurring all the normal regulatory consequences.

The past 12 months has seen major fund groups move into the robo-advice area with BlackRock’s acquisition of US robo-adviser FutureAdvisor, Fidelity’s partnerships with Betterment and LearnVest, Schroders stake in Nutmeg and a partnership between Aberdeen Asset Management and Parmenion Capital Partners.

Guidance route automated

Adrian Lowcock, head of investing at Axa Wealth, says: “I would say that we are still five years away from robo-advice and it probably won’t be ‘robo-advice, but cyber advice and robo-guidance. Advice is likely to require some human element. The guidance route could be automated to some extent, but it will not be advice.

“In general, robo-advice is an over-used term. Everyone is talking about it, but it is more about creating better customer journeys. The advice sector needs to engage with millennials, who are currently disinclined to invest. For them, the interface is very important. The journey and their experiences matters.”

Oil in the engine

Menasakanian added: “George Osborne said that, to stay positioned as the world leader in FinTech, we need the best ‘fin’ and the best ‘tech’. But we should also note that we need to create an optimal environment for the two to work in harmony. Regulation can be the oil in the engine, and the sandbox can be the tools.”

Vanguard’s survey took place at its Wealth Management conference and covered 70 wealth managers. The survey also showed that most wealth managers (42%) are in the early stages of preparing for MiFID II, while nearly 30% said they were on track and only 5% said they were well prepared.

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