Three years on from the introduction of pension freedom and choice, people are now comfortable knowing that the power to make decisions on what to do with their pension savings is in their hands. However they are much less confident when faced with actually making the complex decision itself. Yet thousands are planning for retirement or retiring each and every week are making these decisions without taking advice. In fact, our State of Retirement report last year discovered six in ten of those approaching retirement don’t intend to use a professional adviser.
Without change, the risk of poor ‘self-serve’ decisions or inertia caused by sheer complexity will inevitably result in disappointment and financial ‘self-harm’ for many – potentially causing a ‘mis-buying’ crisis – and a further erosion of consumer confidence in the industry.
We know customers increasingly want hassle-free, de-cluttered, simple and regularly useful financial services that offer good value for money. We also know that as an experienced pension provider, customers consistently benefit from a financial adviser taking responsibility for the selection of products tailored to meet their specific needs and preferences. And yet as our research shows, many believe an advice service is expensive, complicated and daunting. The problem is compounded by a shortage of advisers in the market to serve this unmet potential need generating new innovations. A supply and demand impasse! At LV= we are constantly seeking ways to champion the benefits of more affordable and accessible modern advice services to a wider market. One obvious way to achieve this is through automating advice.
LV= started robo advice development in 2015 in partnership with Wealth Wizards and were live with Retirement Wizard in less than 12 months. A solution that generates regulated retirement income advice selecting different product and provider combinations across the market. And I’m pretty confident we now have the benefit of real experience from the largest number of customers advised through a robo-advice engine. We’ve found customers still want human interaction and this remains an important element of the service to ‘design in’. We have also found that through partnering with the latest technology we achieve agility that enables us to adapt quickly as we gain insights, and in turn allowing us to securely build up the numbers of customers using the service. This use of technology has also enabled us to open up access to customers through five new partnerships.
There has been much hype about the advent of robo-advice over the past three years and from a distance some people may think progress has been slow. However, as a practicing robo-adviser, there is no doubt that robo-advice is generating sophisticated and advice solutions now and advancing rapidly. We are at the cusp of a much-needed and significant financial services transformation. New technologies (including AI and speech recognition) and shared services and data (including GDPR, Open Banking, Auto-enrolment and Pensions Dashboards) are colliding and changing the potential for how our industry better serves customers.
This changing world of technology and democratisation of consumer rights are enablers for radically different connected money management propositions to emerge. This will have the ability to genuinely pull everything together for the customer, relieve them of some of the risks of poor decisions, as well as giving them confidence to make decisions so that they are better off in the outcomes they achieve.
Importantly, only service propositions that are integrated with sophisticated and rigorous automated advice solutions will be truly able to help customers with selecting and explaining the specific product recommendations they crave for the more complex choices. Why? Because the threshold regulatory standard and consumer assurance for delivering personalised product recommendations to customers is financial advice.
So in the world of fin-tech and robo-advice things are moving fast. Modern advisory firms that embrace and re-imagine the potential for how future advice solutions can help meet customer needs are sure to prosper. And most importantly by harnessing the power of technology to make advice more affordable and accessible we will be able to help all customers to make more out of their hard-earned savings.
LV= serves over 5.8 million customers with a range of financial products. We are the UK’s largest friendly society and a leading financial mutual. We are currently the UK’s joint number one brand for Insurance and Investments, according to the 2016 YouGov Brand Index Buzz Rankings. We offer our services direct to consumers, as well as through IFAs and brokers.