Demand for low-cost robo advice led by high earners
More than half (51%) of people earning between £45,000 and £70,000 would use robo-advice (automated financial advice rather than face-to-face contact) for their investments while just 30% of those on incomes under £15,000 would do the same.
According to research by advisory firm Deloitte, 15 million consumers would be willing to pay for automated advice and millennials are also looking to embrace the technology.
Of the 2,000 people surveyed, over two-fifths (43%) of 35 to 44-year-old workers with a pension would use robo-advice on pensions, as would a quarter (24%) for the 45 to 54-year-olds and a fifth (21%) of those aged 55 and above.
Also, 35% of defined contribution pension holders – more than three million people – would be willing to pay for robo-advice to invest their pension pots, with demand highest among those with the smallest pension pots (45%), many who can’t afford traditional advice.
However, Deloitte’s research identifies some key barriers in consumers’ willingness to use robo-advisers.
Gavin Norwood, insurance partner at Deloitte, said: “While robo-advice can help close the financial advice gap, financial literacy and trust also have to be increased significantly. The industry needs to communicate the benefits of robo-advice in a simple and engaging way, for example, how robo-advice works in a safe and secure manner, the lower costs and convenience of 24/7 availability. Only then will people become as comfortable with disclosing their financial information to a ‘machine’ as a human.
“To-date robo-advice has focussed on investments, but its potential extends far beyond and the future looks bright as affordable and convenient automated advice users embrace its potential. In five to 10 years, we will probably not use the term ‘robo-advice’ as digital becomes the recognised channel.”
See YourMoney.com’s Will robo-advice replace your financial adviser for more information.