When the Treasury Select Committee chairman Andrew Tyrie asked FCA CEO Martin Wheatley “do you believe that financial advice can be delivered online without human intervention?” he was probably surprised, in view of recent experience, to receive a straightforward and sensible response. ‘Yes’. It is moreover a response that is likely to define the development of financial services over the next 5 years. While it will hopefully never be the case that complex IHT problems, investments written under trust and the like are dealt with online, to argue that simple ISA investments, money purchase pensions and so forth cannot be effectively advised by a computer is to be something of a Luddite. After all, general insurance brokers and travel agents have already been largely replaced by online solutions.
Let’s look at some figures. There are currently around 14 million consumers in the UK with a risk based savings product. This is likely to increase to 18 million odd in 4 years with auto enrolment. There are 21,800 authorised advisers at present and this is not likely to increase hugely. Taking a top estimate of each adviser looking after 200 clients that accounts for only 4 million, so our ‘advice gap’ is 10 million people and rising. And where do the banks and building societies stand in all this? The sector lost 5000 advisers as a result of RDR, which represents a big loss of revenue.
It is not hard to imagine that Wheatley’s affirmative to Tyrie owed something to a bit of prodding by his mates in the banks. It is even easier to imagine that most banks are already some way down the road to preparing online solutions, as has already happened in other European countries.
Advice will become polarised. There will always be plenty of work for good IFAs dealing with more complex matters.
After all, sophisticated online accounting programmes have done no harm to the chartered accountancy industry. The masses, to a greater or lesser extent, will be looked after by online solutions. Let us hope that plans are already afoot to regulate this properly.
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