EV: Fully embracing hybrid and digital advice is crucial to addressing the advice gap and for the future of advice
Apr 27, 2023 9:36:24 AM
A new white paper from financial software provider EV highlights the importance of fully integrating hybrid and digital advice into advice propositions if the industry really wants to close the advice gap.
Published today (25 April 2023), Hybrid and Digital Advice: Driving Transformational Change, at Last! makes the case that by embracing hybrid and digital advice solutions, the industry can improve access to financial planning for millions of people who can’t or won’t currently obtain traditional advice1, by lowering costs and delivering greater choices for consumers. At the same time, it will also help improve the long-term profitability of advice services by reducing the cost of providing them. EV argues that while digital advice has threatened to disrupt financial advice for nearly a decade, and there has been a marked increase in interest in hybrid solutions (part digital, part human touch) more recently, the sector has yet to see any real, transformational change.
FCA research has shown that consumers need the benefit of advice to make better decisions to save them from significant financial detriment2. However, one size does not fit all, and everyone’s needs differ depending on their life stage and their willingness to engage in achieving more secure finances. EV suggests that by offering a choice of guidance, digital, hybrid and traditional advice, and a seamless transition between these omnichannel options, firms can help more people put money aside for their future, in a way that suits their circumstances.
“Currently, most development activity around hybrid and digital advice is focused on creating a separate channel alongside traditional advice. Alternatively, established brands are making strategic investments in start-up D2C digital advice businesses, which are again distinct from their main offering. For transformational change to happen, hybrid and digital advice must fully integrate into provider propositions to allow customers to move seamlessly between guidance-assisted execution only, digital and hybrid advice and traditional advice according to needs and preferences.
“We know from research into the advice gap that more people would take financial advice if it were cheaper or more accessible. Full integration of hybrid and digital advice into customer propositions will make it simpler and more cost-effective to serve more clients successfully. By offering greater choice and filling the gap between guidance and traditional advice, advisers will be able to deliver better outcomes for more people.”
The white paper digs into the many administrative efficiencies that hybrid advice can provide. By digitising the more procedural aspects of advice, such as onboarding, fact-finding and supplying information, while reserving the human touch for more pressing aspects where investors require explanations and reassurance or have complex needs, advice providers can profitably meet the needs of more consumers at a lower cost per person advised. This can open up more affordable advice to people who are currently priced out of traditional advice.
EV also focuses on trust as a key aspect of the advice process, which is usually built by the relationship between the adviser and investor. However, it believes using behavioural science, human psychology learnings and AI, can help firms retain trust while reducing the level of costly human advice, where it meets the needs and preferences of the client.
“Health and fitness apps like Noom, FitBit and Strava illustrate how setting goals and promoting habit formation can be used to create a personalised journey. A similar approach can be used in financial advice using personality profiling, customised content and different visual presentations to engage, reassure and inform clients with less human involvement.
“How firms implement hybrid and digital advice, how far they go, and at what pace, will depend on what’s right for their business, its customers and their business objectives. We are only in the ‘foothills’ of transformational change in financial advice, but we believe that by embedding hybrid and digital advice tightly within a firm’s customer proposition, firms can increase the number of customers they serve and improve the profitability of their advice service.”