Tech will support advisers, not usurp them
Richard Adams is managing director of Stonebridge Group
2018 never really looked like a year of big changes for the mortgage market, indeed many commentators anticipated it would follow the pattern set in 2017.
That may still be the case in terms of overall lending figures and activity – although anecdotally I’m hearing that many businesses have kicked off the year strongly – but I do sense that in one major area, we’re going to see a significant shift away from the prevailing message of 2017.
Last year, barely a week would go by without some mention of ‘robo advice’ or an ongoing debate about how it was going to fundamentally change the advice market for advisers, and that we were all going to be subsumed by the ‘machines’.
A number of high-profile robo propositions – with large marketing budgets – made a lot of noise about what the future would look like. Unsurprisingly, they had decided the future was robo and that the impact would be considerable for human advisers.
At our recent annual conference, I talked a lot about this and whether this was a genuine threat to advisers or if, as I suspect, it can actually be utilised in certain areas of the market but that ultimately people will still want to talk to a human adviser when it comes to, what is likely to be, the single biggest financial transaction they undertake.
Don’t get me wrong, I see a role for ‘robo advice’ in terms of helping take away some of the administration tasks from advisers, and when you marry it up with, for example, Open Banking, you get to a point where the end to end process for clients can become a lot slicker.
But, and this is a very interesting point in light of recent news, given the nature of lending, the product situation, criteria and the like, can those requests for information ultimately be turned into the ‘best advice’ possible for the client?
I very much doubt it, and it would seem that some of the most vocal robo advisers – with their consumer-facing tech – are starting to see how difficult this is to achieve.
Just recently we’ve had both Burrow and MortgageGym begin moving away from that consumer-faced operation to one which is much more B2B-focused.
Perhaps this is based on a realisation that the UK mortgage market, with all its many options and its products and its commitment to individual underwriting by lenders, makes it incredibly difficult to ensure that a robo client is able to get access to all product options and be provided with the right recommendation for them.
As we might have anticipated, an adviser when faced with the myriad complexities that can come with a client is able to use their experience, expertise and understanding of lenders to deliver a recommendation.
However, this might be predicated on talking to an underwriter, asking them to take a view on a case which might sit outside their normal criteria, and then securing a tailored product offering for that client.
That simply isn’t possible with a robo advice operation – it can’t base its decision on what a lender might be willing to offer because each case is different, and the lender concerned is going to look at each one based on its individual merits.
Ultimately, it’s actually the richness and the variety of the UK mortgage market that is the robo advisers’ undoing.
And while it may well be able to function within a vanilla product scale – and we’re already seeing lenders themselves utilising robo advice to offer this to existing customers in the form of product transfers – it is unable to tie in every single way in which a lender might be able to provide a product to a customer.
Especially, as stated above, when there are multiple incomes or background credit issues, which is why we’ve seen those robo advisers having to stop well short of the full advice and recommendation end-to-end process that they said they’d be able to offer when first launching.
Some are looking like they’re willing to dig their heels in but I wonder how long it will be before these others believe it’s a better business to offer their tech for use by existing brokers and networks, rather than going direct to the customer themselves.
After all, consumers want full advice and if you’re unable to deliver that, then you would think they’ll need to relook at what they can offer and to whom.
In that sense I suspect 2018 will be more about how the tech supports advisers rather than attempts to usurp them.