Has the UK been successful with digital advice?

A decade on from the UK’s Retail Distribution Review (RDR), the country still faces a shortage of financial advisers and digital advice has not necessarily provided the solution, according to Iress’ managing director for wealth.

Speaking to Money Management in London, Alex Hore discussed the advice landscape and the outlook for digital advice as Minister for Financial Services, Stephen Jones, encourages Australia to embrace it.

The number of advisers is at around 15,000, and Jones’ reforms in the Delivering Better Financial Outcomes legislation are hoping advice from banks and superannuation funds as well as digital advice will be able to bridge the gap.

Hore has spent a decade at Iress in the UK and previously worked at BT Financial Group in Australia as a senior manager for business transformation.

The UK’s RDR was introduced in 2013 and, similar to the Hayne royal commission, brought about changes such as the removal of commission and advisers had to be identified as either “independent” and able to advise across all products or “restricted” to certain ones.

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But Hore said the number of advisers is far below what it was pre-RDR and only 8 per cent of the 67 million UK population are seeing an adviser. Some 38 per cent had used one in the past, he said, but stopped for cost or complexity reasons.

This compares to around 15,000 advisers in Australia for a population of 25 million.

Hore said: “Pre-RDR there were 42,000 advisers and now there are only 28,000 and that’s at the same time as we’ve had massive population growth.

“There are such parallels between the RDR here and FOFA [Future of Financial Advice] reforms and the royal commission in Australia. The regulator wants the best and wants to protect the consumer but regulatory change is expensive and that’s come in the form of higher fees for consumers.”

Like Australia, there is hope that digital advice will improve the situation – UK robo-adviser Nutmeg launched as far back as 2012 and Wealthify was launched in 2016 – but Hore said they have struggled to make money. Both providers have since been acquired: Wealthify by Aviva in 2017 and Nutmeg by JP Morgan in 2022.

“Digital advice is a broad term. People associate it with robo-advice, and that hasn’t been successful here. Those providers are still here, but they are struggling to make money because people try it out with £10 ($19) to see what it’s like and then forget their password and don’t use it again. No one has been able to nail digital advice yet,” Hore noted. 

“There were fears that robo-advice was going to take all the advisers out, but that hasn’t happened, and now people are saying it will be artificial intelligence.”

Iress UK has five pillars, Hore said, as to how it is using technology to support advisers with their work. These are to improve advice efficiencies, reduce cost and complexity, ensure it fits in the adviser’s digital ecosystem, provides a high user experience and is delivered consistently.

“Good technology can certainly lower the cost and the complexity, and London is a global hub for fintech so it provides that innovation and competition that we need.

“We have invested in a hybrid solution as nine out of 10 people want to talk to a person, and we have also invested in our support team as people want help from a person not from an AI chatbot. That is a simple staple that can be introduced.”