"The future is a foreign country – they do things differently there". The futurist John Mahaffie took the famous quote by L. P Hartley about the past, and turned it around - to make something more thought provoking (sorry, L.P.). It resonates particularly in the world of financial advice, as it's clear technology has a huge role to play in the future of our market.
But just ten years ago, when Standard Life launched their new wrap platform, there was a lot of uncertainty. We didn't have a clear vision of where the market was going, and at the time it was dominated by standalone retail products, fund supermarkets and trail commission.
Not only that, RDR wasn't on the radar, we didn't know about the move to adviser charging, and platform unbundling was years away. And of course, until recently, we hadn't heard of the phrase 'pension freedoms' – probably the single most fundamental change there's been to the market in many years.
John Mahaffie went on to say that "In considering a future time, you have to reckon with a whole thing: a complete culture, marketplace, society, community, industry, and all the things that shape them. Too often we don't, we take up one change that we think is powerful and important, and leave most everything else like it is."
So when you hear about the future of financial advice, think about the fact that some ideas may never be deployed in the way described – and remember that one single thing probably won't change the market. And don’t be afraid. Recent headlines are causing panic, suggesting that the entire world of finance should fear job replacement by robo-advisers. It's a scary prospect, but the fact is, there is hope – and that hope comes from the past.
Remember the same kind of headlines a few years ago, which told us how RDR would mean the 'end of the line for financial advice'? The predictions were wrong – just like they'll be wrong when it comes to robo-advice. Why? Because intermediation not advice was seen as adding value, and the point of advice was seen as a product sale. Both of which are not true: real advice doesn't need to have a product outcome.
Instead of worrying about Terminator-style robo-advisers, we should be focussing on client outcomes, value in advice, not intermediation – and being technology enabled. Just think: for a doctor, client outcome is critical too. And in medicine, technology has supported the delivery of favourable client outcomes, with material benefits delivered in the accuracy of filling prescriptions and making diagnoses.
It's been 50 years since sci-fi writer Isaac Asimov devised his famous Laws of Robotics, designed to ensure friendly robot behaviour. So I thought, for a bit of fun, I would update them with Tiller's Proposed Laws of Robo-Advice:
- A robo-adviser must not injure the reputation of the long-term savings and investment market or, through inaction, enable investors to come to harm.
- Advisers must accept that technology-enablement will materially enhance transactional activities to benefit investors and advisers alike.
- Both robo-advisers and advisers must accept that the fundamental rules of business do not change as a result of Rules 1 and 2.
The future might be a foreign country – but I’m sure it will be a welcoming one.