Thursday, 23 February 2017 12:45

Robo services hide some costs and must be clearer, panel says

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CII headquarters - where the panel was speaking today CII headquarters - where the panel was speaking today

A panel of industry experts has this morning expressed fears about the hidden costs for consumers of using robo-advisers.

Teresa Fritz, part of the Financial Services Consumer Panel, Ben Goss, chief executive at Distribution Technology and Nick Eatock, executive chairman, at Intelliflo, outlined concerns about opaque charges.

They were speaking at a PFS event in London on robo-advice.

Mr Eatock told guests at the EFPA Conference: “Cost is clearly something that has to be absolutely transparent to clients. Some robos have been round a long time and they are not necessarily a brand new thing. Costs are quite hidden, we found in research.

“I think unless modern-age robos can demonstrate that cost clearly on that first page and whether they (consumers) are getting advice or not, they’re on a hiding to nothing and worse, they’re going to create some systemic problems. That’s my biggest fear.

“There’s going to be an increasing role for traditional financial advice and we don’t want the robo to scupper that.”

Ms Fritz said that “most sites bury away investment cost and charges” and said regarding transparency, “at the moment it’s not there.”

Consumers, “just don’t know what they’re going to pay” and this is what “puts people off advice”, she believes. She added: “We must be much clearer.”

Mr Goss said: “Price needs to be super clear and super transparent and technology is great for shedding some light on costs. Tech drives transparency.”

He said a key issue with automated services are they won't look at a person’s own circumstances and then say the best thing to do is not to invest.

He said: “A lot of services are there to sell investments, they do provide simplified advice, but that doesn’t have the same burden of suitability.”

Ms Fritz also had concerns about the level of consumer understanding about regulated advice when approaching automated or robo-advisers.

She said: “We have two types of advice online at the moment, regulated advice and non-advised sales.”

“I want to see consumers understanding what journey they are going on. I want them to go on a regulated journey and with the provider taking responsibility just as they have to with face to face and telephone.”

Mr Eatock said while the aim was admirable, “I’m not sure the customer ever understands whether they’re getting advice or not.”

The “whole point” of online digital financial solutions is to “capture those who are nervous” about advice but the problem is they do not have the sophisticated understanding that can be required, Ms Fritz believes.

She wants robo-services to ‘kick out’ consumers and direct them to a human adviser if their responses get too complex – something that Money Farm and LV= already does, she said.

Last modified on Thursday, 23 February 2017 14:30
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