Blog | Fintech Tools and Insights | EV

The Evolution of Digital Financial Advice Technology: From Robo-Advice to AI and Beyond

Written by Adam Robins | Jun 9, 2023 2:58:27 PM

Discover the evolution of digital financial advice technology from robo-advice to AI and beyond. In this blog, we explore how these advancements have made personalised financial advice more accessible and convenient for clients.

Introduction: A step back in time

In his popular 2016 article, Andrew Storey, Group Innovation Director at EV, discussed the state of robo-advice technology in the financial services industry. He brought the subject to life through a clever analogy explaining how only the evolution of supporting technology-enabled society to adopt self-serve shopping in supermarkets. It was achieved by gradually introducing barcodes instead of transferrable price tags, special scanners to read the barcodes and chip-and-pin credit cards for faster and more secure payments. In his article, he explained how we could see a similar evolution of supporting technology in financial services that enables society to move closer to truly self-serve digital advice.

Back then, robo-advice technology was still a relatively new and untested development in the financial planning industry. Whilst today robo-advice technology has become increasingly sophisticated and fairly mainstream, several iterations have evolved along the way, including how we refer to it and is now more commonly known as automated or self-serve digital advice and can also be incorporated into a hybrid advice process.

Was advice technology advanced enough?

At the time, Andrew concluded there were still areas where the technology needed to advance, such as analysing individual retirement hopes and dreams, where human, financial advisers are still more effective than algorithms. However, over the years, solutions have emerged to simplify the process of providing self-serve digital advice, such as improving the central dashboards of all finances from providers such as Moneyhub.

So, how much closer are we now to truly self-serve digital advice, and what evolution of technology is helping to land us there?

What developments in advice technology have there been?

The technology available to the financial planning industry has advanced considerably in recent years. Here are some of the key advancements:

Digital Algorithms for enhanced advice

Digital advice algorithms have come a long way and are now available to provide advice across all areas of financial planning. Previously, the focus was on investments only, but now these algorithms can give many advice journeys for advisers or clients. There are many areas where digital advice can be deployed, including.

  • Investment
  • Pre-retirement
  • At-retirement
  • In-retirement
  • Protection planning

With self-serve digital advice, individuals can access holistic financial advice via digital algorithms at their convenience. This allows them to access advice when it suits them, which can be particularly helpful for busy individuals with hectic schedules, much like using the self-serve checkout rather than queuing to be greeted by a shop assistant to scan the items.

Artificial intelligence (AI)

Self-serve digital advice has impacted the financial advice industry in the same way that AI has begun to revolutionise our daily lives. With the help of AI, clients can benefit from the analysis of vast amounts of data to help them receive personalised financial advice. In addition, using chatbots, chat rooms, and avatars with voice recognition makes it easier for clients to navigate the complicated world of financial advice without human advisers. These tools provide clients with an interactive experience that helps them understand complex financial concepts and make informed investment decisions. Thanks to these technological advancements, self-serve digital advice has become an increasingly popular and convenient way for clients to receive financial advice.

 

Open Banking for more personalisation

Additionally, the wider use of Open Banking has allowed financial services to deliver more personalised advice to clients.

According to Open Banking Limited (OBL):

the number of consumers actively using open banking-powered services in the UK tipped at 7 million for the first time.

 

Advisers can also now easily access their clients' financial information, allowing them to give a more accurate assessment of their financial situation.

Health tech has also made significant advances in recent years, with digital watches now providing real-time health data to users. However, there is much to learn from self-improvement programs and apps, such as health and fitness apps, when it comes to encouraging engagement with financial planning and advice. 


Personalisation and habit formation are key concepts that can be applied in the financial advice space to enhance engagement and help individuals achieve their financial goals.

Using the concept of the 'Quantified Self' and self-tracking, an engagement app can provide personalised advice journeys for users based on their personality profiles. Personality profiling can be determined from a matrix of overt questions and subtle gating based on interactions with the embedded content and imported material such as open banking data.

Once a personality profile is established, technology can create personalised content, such as text, graphics, and questions, to guide users through the financial planning process. Using process goals and habit formation can also help users establish positive financial behaviours and progress towards their goals.

Applying self-improvement program concepts to financial planning and advice can lead to a highly personalised and engaging user experience. By leveraging behavioural science and technology, financial advice providers can help individuals achieve their financial goals and improve their overall financial wellbeing.

Access to real-world calculations & enhanced forecasts 

The world of finance is constantly evolving and improving. One of the most exciting developments in recent years has been expanding access to improved calculations and enhanced forecasts. When used within a self-serve digital or hybrid advice process, these tools provide valuable insights and help financial advisers make informed decisions that benefit their clients. For example, forecasts support clients’ plans, so they have enough money to meet expenses, allowing a trend to be measured and ensuring capacity for loss is considered part of the advice.

What does the future look like?

The future of financial advice is going to be even more digital. More digital client-facing solutions will make it easier for clients to access advice and communicate with their advisers via a hybrid or self-serve advice process. Computers will analyse data and provide personalised advice to clients. Technological advancements have significantly improved the financial planning industry's capabilities.

One exciting development we expect to see more of in the future is using data from industry dashboards, particularly the pensions dashboard. However, your guess is as good as mine on when they will be available, given the news that the government is delaying the rollout of their Pensions Dashboard again. These dashboards will give clients a real-time view of their finances, making it easier to understand their financial situation and make informed decisions.

To bring it back to the shopping analogy

Now, back to the shops. The trend towards more seamless and intuitive experiences with technology is still on the rise and has become normal in daily life. Companies like Decathlon and Amazon use advanced technologies such as Radio Frequency Identification (RFID), computer vision, and AI machine learning to create a more frictionless shopping experience for customers. By eliminating the need for physical checkout and payment processes, they are making it easier and more convenient for consumers to shop, ultimately increasing sales and customer loyalty.

Self-serve advice is likely to continue growing, similar to how self-serve shopping has grown in popularity. There are several reasons for this trend:

  1. Convenience: Self-serve advice allows clients to access information and advice at any time, from anywhere. This will enable consumers to research and find answers to their questions without human interaction or scheduling appointments.
  2. Cost-effective: Self-serve advice is often more cost-effective than traditional advice-giving methods. In addition, as technology advances, the cost of developing and implementing self-serve advice tools will likely decrease, making them even more affordable and accessible for clients.
  3. Personalisation: Self-serve advice tools can be customised to meet the specific needs of each consumer. Clients can receive personalised recommendations and advice based on their unique circumstances and preferences.
  4. Increasing comfort with technology: As technology becomes more ubiquitous in our daily lives, consumers are becoming more comfortable using digital tools for various tasks, including seeking financial advice and guidance.

As self-serve advice grows in popularity, we will likely see more sophisticated and advanced tools being developed. These may include virtual assistants, chatbots, and other AI-powered tools that can provide personalised advice and recommendations to consumers. But, overall, the trend towards self-serve advice will likely continue, driven by the convenience, cost-effectiveness, and personalisation it offers clients.

Summary

In conclusion, looking back to 2016, the world has undergone a significant transformation, with the COVID-19 pandemic causing widespread upheaval and changing how we live and work. While robo-advice technology was still a relatively new development back then, advancements in technology discussed above have significantly improved the financial planning industry's capabilities with the move towards more hybrid advice processes. 

With these advancements, financial advisers can provide more personalised services and help clients achieve their financial goals more efficiently. In addition, the development of digital algorithms and backsolves has also improved financial planning processes. 

Overall, the technological advancements in the financial planning industry have made financial advice more accessible, efficient and personalised, transforming how we approach financial planning. In the not-too-distant future, you may even be able to obtain financial advice while on the weekly shop.

 

So what next?

Contact our team today to learn more about how we can support your digital advisory service.