Financial Advice: Can Going ‘Digital’ or ‘Hybrid’ Deliver Better Client Outcomes?

At first sight, this question reflects a tautology, as some folk speak of digital advice and hybrid advice in the same breath as if these terms are interchangeable. So I’m going to go out on a limb here and say that both involve the application of tech to obtain efficiencies in the advice process. However, real differences merit each being accorded their proper place in the pantheon of financial advice.

Undoubtedly, technology is invaluable in the advice process, and more so every year. Advice businesses benefit from back office systems managing client data, platforms handling the admin of CIPs, and risk management and cashflow planning solutions helping to define and underpin financial plans. However, beyond these core technology systems that bolster today’s advice journeys, a new vista is opening up for advice firms to profitably accommodate consumers unable to take up full-fat financial advice and planning. This is where ‘hybrid advice’ enters the equation – differentiated from purely ‘digital advice’, as we will now examine.

Digital advice - pitched to the mass market

It’s best to view digital advice as a process that doesn’t depend on human input (i.e. advisers) but applies technology based on clever algorithms to deliver advice and recommendations directly to the customer. ‘Self-service’ is another way – the consumer interacts with the tech that sets out investment options based on the data the consumer enters into the system. Then this individual makes their own decisions on where to place their money.

Even the smartest algorithms yet devised can’t replace the expertise and experience of well-qualified regulated advisers, so digital advice is more suitable for supplying restricted advice – not holistic or whole-of-market advice – to consumers with specific needs or single-minded goals such as obtaining an income in retirement.

In this instance, efficiencies arrive because advice provided via technology and humans are cheaper to implement than traditional face-to-face advice. In addition, digital advice can help narrow the advice gap affecting the mass market, people who don’t want to get or can’t afford to buy financial advice from professionals. Digital advice is not comprehensive, but it can be argued that it creates better outcomes than getting no advice about the financial options available to consumers.

Hybrid advice - both sides of the coin

So, given that digital advice is a self-serve tech-driven process, and advisory firms provide full financial advice to those who can afford to retain a professional to create and operate their financial plan, we find ourselves looking at a sensible middle way that can suit both consumers and advice businesses, depending on circumstances. In a word: hybrid.

Hybrid advice uses technology to enable and support the firm’s client to carry out some of the admin connected with the delivery of advice, freeing the adviser to step in later with actions of a higher value that, in the client’s mind, justify the payment of a fee. Tasks the client is probably capable of undertaking include completing the initial fact find, filling in a risk-profiling questionnaire online, and updating their personal and financial details using a client portal. A face-to-face or virtual meeting between the client and adviser can delve into the financial plan immediately, minimising the adviser's time gathering data. 

The client performs the admin tasks, apart from reducing the time/cost input of the adviser. The client may be triggered to provide more information, such as assets that may not be uncovered in a conventional fact find. This helps keep client information accurate. Active client involvement will generate greater engagement and loyalty towards the adviser firm.

Supplementing the advice firm's operations, not replacing them

By facilitating hybrid advice, the firm gains process efficiencies via technology, but the human adviser remains central to the advice journey and delivers traditional advice in a personalised manner. Hybrid can work well with all types of advice, serving everyone from those with simple needs to clients requiring complex financial planning. The point is that using technology can cut the firm’s costs, enhance profitability and allow firms to manage more clients and assets with the same headcount. 

The key to this is the firm must make sure its client-facing systems are simple to use and data secure. 

Hybrid and digital advice both have their place

Adviser firms looking to bring their services to a wider audience can deploy hybrid and purely digital advice propositions to match customer needs and circumstances. Both approaches can deliver business efficiencies and growth while enhancing the firm’s image in helping reduce the advice gap. Not forgetting improving the firm’s competitive position in a market looking for innovation in advice delivery.

The FCA’s Financial Lives research in 2020 made it crystal clear too many people have been left adrift when they could be supported to invest. The question is how to help them without pushing an advisory firm into charitable works.

Digital advice provides a low-cost method for clients with simple needs or low-investable assets to access a personal investment recommendation. Once assets attain a certain level, or when circumstances call for more complex advice, hybrid kicks in with the tech directing the client to contact a human adviser at the firm, the system pulling across the relevant data and so eliminating admin and dreaded rekeying of information.

So what next?

At EV, we can demonstrate how embedding the right tech can help advice firms build a low-cost mass-market proposition while remaining profitable, with efficiencies arising from not requiring more hands on deck when scaling up. By implementing a spectrum of advice capacities – adding digital and hybrid models to traditional face-to-face full service – the firm can be transformational in providing more value and consistently creating better outcomes for more people while enhancing business performance, market competitiveness and mutual prosperity.

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You can book a discovery call today to learn how EV can partner with your firm to enhance the advice journey and give your clients the quality and depth of service, support and information they expect today and in the future.

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