Robo Advice market eyes pensions, insurance and mortgages

A new piece of research by Deloitte suggests the technology could have wide-ranging applications beyond wealth management.

A new piece of research by Deloitte suggests the technology could have wide-ranging applications beyond wealth management.

The automated financial advice market is set for a decade of strong growth, according to a new report by consultancy Deloitte, which suggests the underlying disruptive technology will spread into more niches than its current wealth management segment.

In recent years the fledgling but high growth robo advice industry has sprung up aimed at tackling the problem of widening access to financial advice and investing for the retail market.

To date, automated advice has been most prevalent in wealth management – called robo advice - but this is just the tip of the iceberg. In its latest research into the space, entitled The next frontier: The future of automated financial advice in the UK, Deloitte says the UK offers a rich opportunity for automated advice with up to 15 million consumers willing to pay for it.

“We believe will remain fertile ground for innovation, given the increased need for higher net returns from savings in a low interest rate environment,“ said the report’s authors.

The low cost, high convenience and consistency of automated advice will drive adoption into other large markets, they add.

“In particular, we believe adoption will be highest where there is a significant unmet need for advice, such as retirement products, and those which are heavily intermediated but often have inefficient customer-facing processes, such as mortgages.”

In a consumer survey conducted for the report significant, if price-sensitive, latent consumer demand across different channels for automated advice was recorded.

“We believe that increased automation in the provision of advice on retirement products and mortgages is imminent, with a hybrid model involving some human interaction likely to dominate in these markets in the short to medium term. “In 5-10 years we will probably not use the term ‘robo advice’ – digital will just be another channel. The provision of advice will be ‘omni-channel’, although will be underpinned by a consistent underlying engine.”

Firms providing automated advice will have to navigate low financial literacy and engagement, low fees, the risk of customers switching from higher to lower margin products, as well as regulatory risk and uncertainty.

The potential for automated advice to grow in the UK over the next decade, across the following six markets: Simple financial planning, Investing, Defined contribution pension saving. At-retirement, Mortgages, Individual protection.