Hybrid and digital advice will be critical to closing the advice gap, says software provider EV.
A new white paper published by EV finds that hybrid and digital advice solutions can improve access to financial planning for millions of people who can’t or won’t seek traditional advice by lowering costs and delivering more choice for consumers.
However, EV says that while digital advice has threatened to disrupt financial advice for nearly a decade and there has been growing interest in hybrid solutions, there has yet to be any “real transformational” change.
Chet Velani, managing director at EV, says most development activity around hybrid and digital advice is focused on creating a separate channel alongside traditional advice, while established brands are making investments in start-up direct-to-consumer digital advice businesses which are distinct from their own offering. However, for transformational change to happen, hybrid and digital advice should be fully integrated into provider propositions, allowing consumers to move between digital and hybrid advice and traditional advice depending on their needs and preferences.
“We know from research into the advice gap that more people would take financial advice if it were cheaper or more accessible. Full integration of hybrid and digital advice into customer propositions will make it simpler and more cost-effective to serve more clients successfully. By offering greater choice and filling the gap between guidance and traditional advice, advisers will be able to deliver better outcomes for more people,” says Velani.
The white paper argues that by digitising the more procedural aspects of advice, such as onboarding, fact-finding and supplying information, advice firms can profitably meet the needs of more consumers at a lower cost per person advised, opening up more affordable advice to people who are currently priced out of traditional advice.
EV also focuses on trust as a key aspect in the advice process, stating that it believes using behavioural science, human psychology learnings and AI can help firms retain trust while reducing the level of costly human advice, where it meets the needs and preferences of the client.
Velani adds: “Health and fitness apps like Noom, FitBit and Strava illustrate how setting goals and promoting habit formation can be used to create a personalised journey. A similar approach can be used in financial advice using personality profiling, customised content and different visual presentations to engage, reassure and inform clients with less human involvement.
“How firms implement hybrid and digital advice, how far they go, and at what pace, will depend on what’s right for their business, its customers and their business objectives. We are only in the ‘foothills’ of transformational change in financial advice, but we believe that by embedding hybrid and digital advice tightly within a firm’s customer proposition, firms can increase the number of customers they serve and improve the profitability of their advice service.”
