Furthermore, it will allow the existing cohort of advice professionals to help more people get support where they have the greatest need: at and in retirement.
To be blunt, the regulator’s review will probably have little effect in this area as it is excluded from being suitable for simplified advice and tailored guidance, and is unlikely to be effective for such a critical financial decision.
The FCA’s proposals seem to be focused on basic investment (for example Isas) and pre-retirement support, where demand for in-depth advice is not huge.
Improved AI-supported guidance could come into play here, but this will not address the needs of people entering and living in retirement, where decumulation, longevity, and not running out of money are issues calling for expert advice from regulated professionals.
Take a good look at hybrid advice
The key to making advice more accessible to more consumers when they need it most is implementing digitally-assisted processes that deliver efficiency gains and cost-effectiveness, reducing the time an adviser needs to devote to each client. In this way, it is feasible for the firm to deal with more clients and retain profitability.
In practice, and increasingly being welcomed now, the hybrid approach enables the client to do more for themselves (fact-finding in particular); automates the suitability report; and provides algorithm-generated recommendations.
The adviser steps into the journey at the stage of reviewing recommendations and explaining the plan – this is where human help is most valued and advisers’ time is best spent.
AI can also be used to help the client through the process by answering questions, doing ‘what if’ calculations to present choices, and predicting where and what form of support particular types of clients may need to help them through the process.
The productivity gains come from several directions. Firstly, by its nature, digital advice can become progressively more cost-effective and efficient as it beds in.
And then integrating it closely with traditional advice will free up advisers to focus their time and effort on more complex advice areas where their input carries the most value, with the more straightforward admin aspects left to clients to perform themselves at their convenience.
Firms can widen access to advice profitably
Ultimately, by adopting hybrid advice as a model, firms can expect to be providing advice and support at a considerably reduced cost without sacrificing their core business of serving their most affluent clients who have needs and expectations met by the full package of conventional advice.
So, the short answer is that the FCA’s review is likely to have only a very limited impact on the supply side of advice, and tailored guidance will, at best, help only with simple financial needs. And here, AI-enhanced guidance will probably be more effective, but that is a subject for another article.
