Faceless online advice is a dangerous concept, and not worth the risk for financial advisers who will always find demand for high-quality advice at a fair price, Matt Johnson has said.
The financial planning director at Staffordshire-based Pro Synergy said that online automated advice machines are not capable of dealing with complex situations, and should not be used beyond mortgages, Isas, and general and pet insurance.
According to Johnson, those championing online advice models were forgetting the importance of financial health, and ignoring the fact that digital systems would increase professional indemnity (PI) insurance premiums and see advisers targeted more by the regulator and ombudsman service.
To illustrate his point, he questioned whether people would be happy for medical advice to be automated.
He said: “What if we engaged the same process with dealing with your GP or specialist? Would you be confident that the advice you got back would be accurate and appropriate? Would you put your physical health in online hands? Why would you deal with your financial health any differently?
“When advising, it is so essential to be able to converse and discuss thoughts, feelings and attitudes with clients, and document these conversations in detail. How can you do this, even simplistically online, and still advise fully and appropriately?”
Another factor stopping the majority of advisers from embracing talk of online services, Johnson claimed, was a growing lack of trust in the regulator.
He said the FCA caused the advice gap with the retail distribution review, and, irrespective of its latest bid to encourage simpler advice methods, would soon turn against advisers should things go wrong and complaints arise from online services.
Johnson added: “If the entire adviser community could trust the regulator and Fos to back up and support good advice, that is one thing, but we cannot.
“Both the regulator and Fos side with the client, irrespective, and the adviser firms’ PI insurance premiums go sky-high. Where is the back-up for the adviser then? All we were doing was reacting to the regulators requests to close the advice gap.”
Given all the potential complications that could arise from an adviser offering a simplified online advice proposition, Johnson said it was in the best interests of the profession to only focus on face-to-face meetings with ‘fewer’ high net worth clients.
In spite of all the noise that the advice gap and RDR has threatened the profitability of many adviser firms, he added that high-quality advice would always be in demand, and that people were willing to pay a fair price for extra quality.
Simon Webster, managing director of Kent-based Facts and Figures Financial Planners, said: “The masses may ultimately be prepared to settle for online, and the FCA may even allow it, but I for one would not commit my business to a lower-cost mass-market approach with open-ended lifetime liability to retrospective regulatory change. There will always be a place for personal face-to-face advice.”
