"What an app can’t do is actually empathise with you, understand and tease out your goals and aspirations"
FINANCIAL advisers and investment experts have shared their concerns about a new fully-automated finance app.
Laura Cornely, director of Count Finance, spoke to FT Adviser about her new app which is the first company in the UK to offer financial advice fully automated.
She said: “I saw a gap in the market to take everything that a financial adviser does and fully automate it.”
Experts shared their concerns.
Rob Mansfield, Independent Financial Advisor at Rootes Wealth Management, said it would surely struggle to react to complex and nuanced situations.
He said: "Everything is doing some heavy lifting here. It sounds like it can do the basics and that may be all that some people need to get them started, so it could be good as a building block to help reduce the advice gap.
"The proof of the pudding will be seeing how it copes when things get more complicated or how they're going to avoid foreseeable harm by having it all automated. How will it react to an irrational request to sell when markets fall?
“Or cash out in anticipation of a hypothetical budget change? There's always nuance when you get into planning and so two very similar people can have two different outcomes.”
Scott Gallacher, Director at Rowley Turton, pointed out that you can't “automate a bereavement conversation”.
He said: "Automated advice might help plug the advice gap — and in that regard, I welcome it. But it won’t replace real financial advisers any time soon. Financial advice isn’t really about number-crunching or product selection, it’s mostly psychological. It’s about guiding real people through messy, emotional and complex life decisions.
“You can’t automate a bereavement conversation, help a couple align conflicting retirement goals, or offer tailored reassurance when markets crash. If anything, robo-services will create future clients for human advisers — not replace them.
Samuel Mather-Holgate, Independent Financial Adviser at Mather and Murray Financial, said a human touch is what is needed in the financial world.
He continued: “What an app can’t do is actually empathise with you, understand and tease out your goals and aspirations. Yes, it might be able to construct a portfolio, but advisers get fund managers to do this. Yes, it might be able to strategically suggest a tax-efficient withdrawal strategy. What it’s missing is the arm around the shoulder and the understanding ear. That’s something no tech-leaning start up will ever reproduce. Notwithstanding, there is a place for this in the market, it’s just not huge.”
Philip Dragoumis, Director and Owner at Thera Wealth Management, joked: "That's so good. Have they found a way to automate helping — and consoling — a widow dealing with all her financial affairs after her husband has passed? How about sitting down with an elderly couple and discussing their legacy, and how much to gift each of their children? What about calmly addressing client concerns after a sharp market correction? Or adjusting financial plans because they found the perfect holiday home they want to buy? Let me know if there is an app for all that."
Kundan Bhaduri, Entrepreneur at The Kushman Group, equated it to "replacing your GP with a vending machine".
He added: "Would you like that option though? Count Finance may well find a ready audience among the under-35s who trust subscription models more than human expertise, but wrapping complex financial advice into a mobile app is a long way from democratisation.
"The irony is that many of the people who now reject professional advisers on the grounds of cost have more to lose than they realise. A well-constructed pension plan or estate structure can shield hundreds of thousands from the taxman. Try asking an app about inheritance tax mitigation through deeds of variation and watch it politely crash.
"According to the FCA, only 8% of UK adults have taken regulated financial advice in the last year, while £26bn sits idle in forgotten pension pots. We are training an entire generation to believe the biggest risk to their money is fees, when it is, in fact, financial ignorance masquerading as autonomy."
David Stirling, Director at Mint Mortgages & Protection, added: "This is not a unique service and others such as JustFA have been targeting a similar audience for a year or so. Since RDR there has been an advice gap.
"Startup clients with low monthly payments don't always fit under traditional IFA charging structures, even with the changes under Consumer Duty. These potential clients do need advice and new technological ideas should be lauded to help them get started. There will always be specialist planning for HNW clients, so it doesn't spell the end for the old face-to-face IFA."
