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Don't fear the 'robo-adviser'

'We see the wealth manager and robo-adviser working alongside each other'

3 June 2015

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The wealth management industry should stop fearing 'robo-advice' and embrace the possibilities created by the innovation.

That's according to the managing director of Thomas Miller Investment, Matt Philips, who believes that the impact and effect of automated advisers has been negatively exaggerated.

Robo-advisers are low-cost, automated money management advisers, which are designed to determine the best asset allocation for investors' based on their risk profile.

'The death of the face-to-face adviser is exaggerated. Technology will only enable more human interaction, not less. We see the wealth manager and robo-adviser working alongside each other,' said Philips.

'Robo-advice in the years to come will be dominated by the big institutions such as insurance companies and banks.'

US based wealth management firms have been the pioneers in automated advice in the industry for the past decade, which has had a steady and consistent uptake.

Vanguard Group recently lowered their minimum account size for their 'hybrid' automated services from $100,000 to $50,000, following the successful completion of a pilot introductory phase.

UK based wealth management firms have been slow to introduce robo-advisers, but there are signs that this might be about to change.

The Financial Conduct Authority recently clarified its definitions on what constitutes advice, following protests from the industry that uncertainty was inhibiting innovation.

The new definitions have been taken as a green light by many to introduce robo-advisers and diversify their offering.

Philips would like to see the industry utilise this opportunity, especially given that automated advice has limited capabilities.

He commented: 'Over the next five years, ISA and personal pensions will be taken up cheaply online through a decision tree and via a provider, or even a supermarket. However, I struggle to see a decision tree dealing with complex issues for an individual who is retiring.

'The rise of the robo-adviser is a positive for consumers and advisers. It will mean more people will be engaged in savings and that will lead to more opportunities for advisers. It should be welcomed by all and not feared,' he added.


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Tax & Wealth structuring