Andrew Firth - Wealth Wizards

Could UK robo-advisers leapfrog their US counterparts? 

On both sides of the Atlantic, our collective desire for instant access to information and a DIY attitude has shaped the digital landscape. Transforming the way we interact and transact, automation is affecting all areas of modern life.

Moving far beyond the convenience of day-to-day banking and payment apps, the fintech industry is growing rapidly with robo-advice at its core.

The term used to describe automated services for investment, asset, pensions and insurance management, robo-advice allows individuals to tailor their financial products via online tools and mobile apps.

Barriers of traditional advice in the UK

Robo-advice is a convenient and lower-cost way of accessing advice and investment expertise for the masses, who have been largely priced out of the UK advice market.

In 2013 the Financial Services Authority (FSA) banned financial advisors from offering free advice to customers while earning commission from the providers of the products they recommended. Since then fees have steadily risen, pricing out many with smaller savings pots.

A poll from found that financial advisers increased their fees by as much as 16% in 2015 alone, withthe average cost for pensions advice now totalling around £1,490. Resulting from this the Financial Conduct Authority (FCA) and Treasury claim that up to 16 million people could be trapped in a “financial advice gap”.

The FCA’s Project Innovate is helping the wave of Fintech innovation to navigate the way to providing regulated services. There are a range of robo-advice services in the UK including those offering help and guidance, investment management or personalised recommendations, with more expected to enter the market imminently.

The US market

Changing the advice landscape in the US since the mid-late 2000s, consultancy firm Deloitte found that robo advisers currently cover less than a billion pounds of assets in the UK, compared with $19 billion in the US.

According to research from consulting firm A.T. Kearney, the robo-advice industry is flourishing in the US, where there are now more than 200 platforms. It’s estimated that 1 in 5 customers that use banking services in the US are aware of automated online investment services, and research suggests engagement is high among those with small and large investment portfolios.

Platforms from Wealthfront, FutureAdviser, Charles Schwab,Vanguard and Bettermenthave proved hugely popular in the US, and now major institutions such as Morgan Stanley and Bank of America are looking to enter the marketplace.

The UK market

New entrants such as Nutmeg, Wealth Horizon and Money Farm are focused on helping people make and manage their investments in a similar way to many of the US robo-advisers.

Among the high street banks, Royal Bank of Scotland (RBS), made headlines earlier this year when it cut the jobs of 220 face-to-face advisers in favour of the future introduction an online service. RBS’s claims its new online investment platform will enable the bank to help a new group of customers with as little as £500 to invest. Customers with more than £250,000 to invest will still receive personalised face-to-face advice.

Following RBS’s announcement, speculation has been building that Barclays, Lloyds and Santander UK are also developing online services.

Large insurers are also interested in robo advice and one – LV= has already launched a service offering automated personalised at-retirement advice, using Wealth Wizards robo advice platform technology.

Wealth Wizards, which aims to make financial advice affordable and accessible to everyone, has pioneered the development of robo-advice in the UK. Founded in 2009, Wealth Wizards offers the leading robo advice platform in the UK.

Combining three key competencies; investment expertise, chartered financial planning and software engineering, Wealth Wizards platform can support multiple advice services.

The potential of robo-advice

A 2015 US market report from research firm Cerulli Associates claims robo-advice platforms are expected to reach $489bn (£323bn) in assets under management by 2020, up from $18.7bn.

While the UK is undoubtedly a smaller market, the UK robo advisers are arguably catching up in terms of capability and in some cases further advanced.

And with the regulator supportive of fostering innovation and development in the UK, it may be that UK robo-advisers develop leading technology platforms that become the global winners.

Andrew Firth, CEO, Wealth Wizards