Robert Forbes of London-based wealth manager Stadden Forbes is planning to take robo-advice to a new level by offering a comprehensive digital financial planning service.
While he admits it is a big challenge to offer regulated digital advice that is comprehensive, engaging and profitable, Forbes says he is committed to that goal with the service, due to launch in late spring.
He accuses other robo offerings of cynically grabbing assets on which they can charge an ongoing fee and offering little in return. ‘They ask for your name, age, attitude to risk and bank details – that’s kind of it,’ he says. ‘Not mapping consumers’ lives [more richly] is problematic because it fails to give the context to the investment solution.’
He also believes this lack of value could give those robo services a bad reputation and lead to low customer retention rates.
Threat to traditional business
Forbes is collaborating with a finance technology firm to create his service, which he says is an attempt to beat off the threat to his face-to-face planning business from online providers over the next ten years. The venture capital backed project, which is in testing phase, plans to target mass affluent, younger professionals at associate and senior associate level.
Forbes does not anticipate the same volume of customers as services such as Nutmeg, which has 30,000 users. But it does not need those numbers because offering fuller advice to professionals should attract higher investment sums and higher retention rates, he says.
Few robo providers have yet ventured into complex areas such as retirement advice. Forbes does not yet want to reveal all the areas his service will provide full digital advice on as he says it’s a constant work in progress – but it will certainly include both investment and retirement. The biggest challenge is delivering ‘real advice’ that is not heavily caveated, he says.
‘Face-to-face advice can say “you should do this because of XYZ”. Online advice is much vaguer. It tends to say, “you could do this, if this or that are true”. It’s very “buyer beware”. But people want more robust advice.
‘If we had 1000 data points, we could deliver very specific advice but getting someone to give you 1000 is tricky. It’s a fine line between keeping people engaged and giving them something relevant. So far, we are asking for about 30, over several engagements with the system through time.’
He adds that gaining information from other sources – such as banks, employers, and life companies – that the user then just needs to confirm, will be increasingly useful as the service evolves.
Better user experience
The service does mention even more complex areas such as the possible need for inheritance and capital gains tax planning – ‘Otherwise we are not doing a full job,’ says Forbes. ‘But at that stage, it will refer to an adviser because it is too nuanced. We can’t get a robust answer online.’
He is not comfortable with the concept of gamification – making the interface more like a computer game – to engage customers, as it risks trivialising the importance of looking after people’s money. But the technology is going to great lengths to enhance the user experience, says Forbes.
‘The key to success will be making sure customers can see that the more they put in, the more they get out; and giving them some instant results so they can see it progress,’ he says.
‘Also the more relevant to their lives, the better. So we enhance the user experience, not just making it look pretty, but building in multi-layered, personalised content which encourages customers to go back and add more data. For example, the type of language and what the user sees changes according to their age group, to make it more appropriate. Work from our focus groups showed that older people valued a look of solidity more than younger ones, who prefer it more like a game and less stuffy.
‘Also some data points relate to their leisure activities, so it can then provide other content that links to those activities. It tries to find as much relevant information about the client as possible from other sources to achieve that. Lots of little things like this start to make a difference.’
Value of self-learning
Forbes adds that artificial intelligence is at the core of the service. ‘It’s self-learning, so the more data we get, the more and better assumptions we can make,’ he says. ‘That will add huge value by improving the information we have and using that to enhance the experience.’
But with so many large players already offering robo-advice and many more big brands eyeing the market, how can he compete?
‘It goes back to the user experience, and the quality of the product, the advice and the marketing,’ says Forbes. ‘Large banks continue to do more in this area. But there are plenty of people who don’t want to associate with a bank. Besides, it’s a big marketplace.’
We asked eight leading financial professionals: “Where do you see the asset management industry in 5 years?”. Read their responses across a broad range of topics including fees, millennials, robo-advisors, ETFs, index funds and regulation.
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