Isn’t ‘Robo-Advice’ Just A Distraction For Most Advice Firms?

Three years ago, when every man and his dog in adviser land was falling over one another to launch a white-labelled direct-to-consumer platform, I wrote a blog about how big a waste of time it was. It’s pretty clear today that most D2C platforms launched around the time by small adviser firms have either closed shop or are nowhere to be found in the direct platform space. How right was I… yeah, yeah… self attribution bias….  broken clock… all that!

Robo advice is all the rage right now and I see advisers making the same mistakes they did with D2C platforms. Essentially, small firms are white-labelling robo-platforms, as a way to reach people who can’t afford (and who probably don’t need) full advice. I can’t seem to shake off the feeling that this trend is nothing more than a distraction for most small firms. Here’s why?

  • Shortage of advice for those who CAN afford it

Thanks to Pension Freedoms and the static number of advisers, there has never been more demand for advice by people who actually do need and can afford to pay for advice. It’s estimated that there are around 3.5million people in the UK aged between 60 and 64, and estimated 700,000 a year will reach the age 65 over the next 5 years. Retirement income is a top-of-the-mind issue for these people but assuming, that 90% of these people don’t want/need, can’t afford advice or perhaps already have an adviser, that’s still leaves around 15 potential new clients for the 23,864 registered advisers in the UK. I chose retirement income planning because, it’s one obvious areas that robos haven’t really cracked, yet. Off course, there are other categories of people (younger and older) who need advice in other areas including tax, care and estate planning – these are areas that are too complicated and emotive to be easily disrupted by robos and advisers can clearly add value. 

My questions is, shouldn’t small advisers firms be spending their limited marketing budget and bandwidth specifically targeting clients who need and can afford advice, rather than spreading themselves too thinly with robo-advice?

  • Cost of Client Acquisition

In financial services, if you just build it, they WON’T come. While robo-advice technology has improved efficiency in client onboarding, portfolio management and reporting, what they haven’t managed to crack yet is client acquisition, without blowing a multi-million pound marketing budget.

One reason even large robo-advice firms are struggling is the cost of acquiring clients. It’s estimated that the typical cost of client acquisition in FS is around £150 per client, but when your typical client has less than £30,000 investable asset and you’re charging 30pbs, then the entire revenue in the first few years is gulped by client acquisition cost, not to mention overhead from servicing clients and running the business.

Take Nutmeg for instance, having raised over £35million in VC funds, it’s spending millions on adverts on everything from billboards and London Underground trains to TV, but the firm has less than £150million AUM after 4 years of trading!


Let’s face it, like any small business, most advice firms have hardly any marketing budget at all. The marketing currency of a small firm is TIME, which is often spent networking, client event and creating online content like blogs and videos etc. Accordingly, small adviser firms would really do better to spending their marketing currency on areas where they’ll get the most bang for their buck.

Perhaps I’m not very clever but I don’t understand why anyone thinks that prospective investors are going bypass Nutmeg and VC funded startups, who are spending millions on search engine optimisation, TV adverts, social media marketing and go invest with via a website by a small, relatively unknown IFA firm. 

And even if a small firm has got time and sizeable budget to spend on online marketing, social media, podcasting, search engine optimisation blah blah blah, why not spend that to promote their current high value services, helping people with complex needs such as retirement income planning, Lifetime Allowance issues, long-term care and estate planning? Why spend time and budget to go head-to-head with low touch, low value services from Nutmeg?

  • Same Clients, Better Technology 

If there’s one lesson financial advisers can learn from robos, it’s the fact that we can do a better job using technology to improve our services to existing clients. So rather than competing with robos by offering low-value services, why not use robo-type technology to improve client onboarding, portfolio management, administration and client reporting for existing clients?  

Research suggests that around  66% of advised clients would consider leaving a firm if they are not using technology to deliver much of their services in the next 5 years. Accordingly, the challenge for advisers isn’t competing with robo on low-value services like portfolio management but using better technology to deliver high touch, high value services that solve real financial planning needs of existing clients. The real challenge for advisers is to find best to breed technology to reduce operational cost and deliver better client experience, while dealing with complex and emotive financial planning need that robos aren’t currently capable of dealing with. 

[bctt tweet=”The real challenge for advisers isn’t competing with robo on low-value services but using technology to serve their existing clients.”]

Having said all these, there is clearly room to reach a different kind of demographic that the current advice model isn’t geared to reach, primary due to percentage based fee model, which doesn’t work well for people without large assets.  For instance a fixed monthly retainer model may be more appropriate for younger high-income-low-asset clients (also known as HENRYs – High Earners, Not Rich Yet). This may actually work well if bolted on robo-advice but the key service here financial planning, not just portfolio management delivered by robo. I’m really yet to see a proposition like this in the marketplace. All I see right now is, small IFA firms, with no marketing budget, very little presence on social and traditional media, and hardly half decent websites who are trying to compete with VC funded startups.

I’m thinking this is all going to end in tears. Someone please, tell me what I’m missing. Go on post some image of George Bernard Shaw”s quotes like ‘people who say it cannot be done should not interrupt those who are doing it’ but if anyone says ‘you don’t get it!’, I promise I’ll punch them in the face. 




Abraham Okusanya
Abraham is the founder of FinalytiQ, a research consultancy for platforms, asset managers, and advisory firms. Recognised as one of the country’s leading experts in retirement income, platforms and investment propositions, Abraham has authored several papers on these subjects and delivered talks to the Personal Finance Society, The FCA and several conferences across the country.
He holds a Master’s degree from Coventry University and an alphabet soup of qualifications, including the Investment Management Certificate, Chartered Financial Planner, CFP and Chartered Wealth Manager designations. He was one of 5 finalists for the Professional Advisers Personality of Year Award 2015 but the award went to a more deserving winner, obviously!

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    I’m glad that HENRYs are younger high earners (not yet rich yet!) Advisers can work with robo in niche areas- for instance helping SMEs choose a workplace pension is a non-profitable activity for IFAs but can provide SMEs with a good answer at less than £100.

    Where an adviser feels obliged to help a client but can’t afford to do the job him/herself, Robo-Advice can provide an outsourced answer.

    HENRY (54 years Jung)


    I cannot disagree with you this time 🙂 Your article is a very good analysis of the situation.

    We deal with a few HENRYs (I like this acronym), expecialy children of clients and a good technological platform directed at them would work pretty well.

    First a sensitive factfind module to be filled before the meeting will help. Afterwards the client will have a chargeable meeting with the advisor, when after I short discussion the advisor will identify a couple of goals: deposit for a house as the priority and retirement. The system will quickly come up with some monthly amounts that the client would contribute towards the first objective and show the shortage in retirement based in AE contributions.

    It will be good this system to have a risk management engine as well, which will calculate the need for additional life insurance, CI need and income protection, and which will allow the client to apply online without the help of the advisor.

    Obviously at the end the system should provide a draft for the suitability report which the adviser flicks through, approves it and it is distributed electronically.

    I believe that True Potential is the closest CRM system that could be used profitable with HENRYs. They also have the True Potential platform where different discretionary investment propositions could be run for certain objectives.

    The cost of aquisition will be met by the fee for the meeting and the commission for protection. I am not going to do it, too busy with the 50-85 age group, but I believe it can be done.

    Alternatively, as the “young” Henry said it could be tried by corporate advisors. There are some platforms which offer employer benefits and optional othe services, including discounted holidays which could be modified acordingly


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