We agree that these are the three main characteristics of automated financial advice tools but challenge the notion that automation staff/human interaction with the customer in the process should be limited or non-existent. In the experience of TPAS, people struggle to understand pensions and to limit the possibility of human contact may mean that quality of inputs to tools become relatively meaningless as people fail to understand key concepts and issues.
There may be in the future automated financial advice tools that are set up to interact with human guidance services.
There may be a need to have staff present for those who are less technically able, financially capable or have general capacity concerns. This might also include public guidance providers who could assist with understanding.
Automated financial advice tools may need to hand-off to professional regulated advisers where advice needs going beyond focus of the tool or regulation require.
We are aware of robo-advice being offered in the pension sector in the UK on a trial basis.
We agree with the descriptions but with some caveats. It is our understanding that some automated tools can actually be complex and time consuming because of the sector they are offering advice in.
They could allow for a regular review process with the service sending out notifications on anniversaries of initial advice for example.
Yes, where the sector and nature of the advice is straight forward then the benefits of automation are more obvious.
Yes, there is the risk of financial crime, where unscrupulous organisations set up their own online advice tools to steal from customers either their money or their identity.
Specifically in the pension sector there are more acute risks if people are making decisions at a decumulation stage that might prove irreversible. These acute risks point to the need for human interaction in the form of guidance services to help the customer sense check the recommendations before implementing them.
We haven’t directly observed this as it is early days for automated advice in the pensions sector.
In the pensions sector, we could see it evolving to allow people to find workplace pensions that they have lost track of and to allow them to see all their pensions in one place. We could see this online information feeding into public guidance services that would allow them to make decisions based on impartial information. This could also build on the proposed pension “dashboard” initiative in the UK, which we see as having considerable value to many consumers.
We could also see online tools linking in to public guidance to offer financial advice after consumers have an understanding of the options available to them and gained a better understanding of their own situations.
We see it as potentially a useful service in broadening the audience for financial advice as well as closing the gap between those who can afford advice and those that cannot.
We do however feel that it cannot fully substitute human interaction and that there will be many who will still need public financial guidance to help them understand their situation and their options fully.
We also feel it will be difficult to strip out human interaction from the advice process as you will probably need someone to sense check that the consumers are getting the right result and someone to sign off on the advice.
Many cases in the pension world will need a human being who is a regulated financial adviser due their sheer complexity.