Robo-advisers could meet the financial planning needs of at least one million people in the UK over the next few years, according to business advisory firm Deloitte.
Deloitte estimates that robo-advisers – business that provide online, automated and low-cost financial advice to individuals – will help almost one fifth of the five million UK consumers who are currently unwilling or unable to pay for financial advice.
“Robo-advice can dramatically reduce the cost to the consumer, potentially to £100 per transaction,” said Andrew Power, investment management partner at Deloitte. “It will take a number of years to attract people who fall in the advice gap until they develop trust in a ‘machine’ solution and are encouraged to engage more proactively in financial decisions.”
Deloitte predicts that in the short term, the quickest take-up of robo-advice will be from the two million ‘tech savvy savers’ or consumers who use the internet to research saving plans for themselves.
“As 50% of these savers seek financial advice on choosing savings products, we think one million people could easily use robo-advice,” said Power. “Over time, we think robo-advisers could theoretically close most of the advice gap.”
Robo-advisers currently cover less than £1 billion assets under management (AUM) in the UK, but the US robo-advisory market handled US$19 billion AUM in 2014, showing potential for the UK market to grow.
“The UK is well-placed to use robo-advisers, given the high take-up of other online services,” said Power. “This is only going to increase, as technology develops, people become more comfortable using it and more companies turn to digital platforms. For wealth managers, robo-advice technology could mean people have access to a broader range of advice that is personalised and at a lower cost.”
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