Response to joint Comitteee Discussion Paper on automation in financial advice
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We would broadly agree with the European Supervisory Authorities’ (ESAs) description of ‘automated financial advice’, however when looking at its application, we would caution that the scope may be too wide. It also important for the ESAs to be mindful that the concept of ‘advice’ in general is at the centre of debate in the UK as we await the FCA response to their Financial Advice Market Review (FAMR) call for evidence, the initial response is expected on the 16 March 2016.
Taking a wide interpretation of ‘automated financial advice’ may create unintended consequences.
It is problematic that the ESAs have not defined ‘automated financial advice’ from an agreed EU legislative definition. Therefore the perspective on this is not robust, or legally sound, as it would be entirely subjective, and is limitless.
It would therefore be advisable for the ESAs to use existing agreed EU legal definitions, for example as set out in MiFID II.
There is a clear distinction between regulated ‘financial advice’ (automated or otherwise), and ‘guidance’ or ‘information’ for consumers, which is based on the Markets in Financial Instruments Directive II (MiFID II). As a result, we would not consider some examples presented by the ESAs as ‘automated financial advice’, notably Price Comparison Websites (PCWs), automatic quote generators or decision tree processes. Instead, we would consider these to be tools to be used by consumers to help ‘guide’ or ‘inform’ them, opposed to offering any ‘advice’ or personal recommendation.
Lack of clarity whether comparison websites are in scope -
While we appreciate that the ESAs are consulting on what constitutes ‘automated financial advice’, we would point to a lack of consistency of whether ‘comparison websites’ ought to be included in the scope. For example, on page 14, paragraph 27, it is suggested that ‘most comparison websites’ are out of scope, yet on page 23, paragraph 60, they are presented as being a risk when they have certain characteristics.
From the UK’s perspective, we would not consider comparison websites in the General Insurance space to be in scope of ‘automated financial advice’ as these tools present options, opposed to making personal recommendations, to consumers. It is common place in the UK for these services to cover more complex products without there being advice involved. Indeed some Independent Financial Adviser (IFAs) and other intermediaries make use of comparison websites to engage, educate and inform customers without advice being delivered.
It would be helpful in any future recommendation that the ESAs present for a clearer view to be taken, which takes into account the specific nature of comparison websites in the UK.
Exclusion of digital consumer tools -
‘Digital consumer tools’ should not be in the scope of ‘automated financial advice’ as, in the UK, we would consider these to deliver ‘financial education’ in the form of information and guidance to the consumer. For example, in paragraph 89 of the Paper, online quote generators are considered to be within this scope. However these tools would not be considered to be providing ‘advice’ in the UK.
Automation vs human interaction -
It is important to consider that there are varying levels of automation and human interaction with any ‘automated financial advice’ model. Whilst some processes may be fully automated, others will rely on some form of human interaction, for example in delivering the outcome of the process or querying the customers input. It is also imperative that any new regulations do not constrain innovation in the financial services market.
We believe that the UK market is ahead of other EU Member States in developing automated financial advice propositions and in terms of consumer use of these processes. Indeed, in respect of a system that delivers full financial advice with a personal recommendation for a retirement income product, the UK can be seen to be a world leader.
In terms of the scope of this Paper, insurers and long term savings firms operate a range of Price Comparison Websites, automated comparison tools, automated quote generators, and other educational tools and calculators, none of which provide financial advice.
4.1. what type of entity you are, e.g., long established, start-up, a product provider, an intermediary;
LV= is the UK's largest friendly society and a leading financial mutual. We serve 5.7 million customers with a range of financial products and employ over 6,000 people. We offer a wide range of financial services including general insurance, investment and retirement products. We offer our services direct to consumers and through IFAs and brokers, and through strategic partnerships with organisations such as ReAssure and Nationwide Building Society.
4.2. the service you provide (e.g. to what extent do you integrate human interaction in the tool you provide?);
In June 2015, in direct response to the growing need for affordable advice to help individuals make the most of the new pension freedoms, we launched the LV= Retirement Wizard, the UK’s first ever fully regulated online advice service.
The new service, which we have shared with the FCA throughout its development, takes the best of new technology through powerful algorithms to reduce costs and improve convenience and mixes it with additional online, video and telephone based advisor support to help ensure the recommendations are the right ones for the customer and available with human contact and support. We describe this as technology with a very human touch.
The new tool makes advice accessible and affordable. The cost is £199 for a fully regulated advice report and money back guarantee. The service is designed to help the mass unadvised in the UK to get more from their hard earned pension savings through an online based journey that engages, educates and provides convenient and low cost advice for customers.
4.3. the nature of your clients;
LV= and Wealth Wizards work in partnership with employers as part of their employee benefits package, as well as alongside pension consultants to offer pension and retirement advice to company employees. It is also available as a white label solution and direct to consumers via insurers and pensions schemes.
B&CE, provider of The People’s Pension, has joined forces with retirement specialists LV= to offer an online planning service to members approaching retirement.
From March 2016, the 2.3 million members of The People’s Pension and the historic construction industry scheme EasyBuild will now have the option to make use of the innovative and easy to use online solution if they don’t want to seek traditional financial advice.
Members will be able to access a free guidance report setting out four possible uses for their pot and how long it could last, and a personalised online retirement advice service costing just £49. They will still be signposted to traditional advice routes first, but the online tool will help fill the advice gap for those who don’t want to use them.
The new service launches in the wake of new YouGov research for The People’s Pension which found that only one in five of the general public (18%) currently use a financial adviser. Nearly three in ten (30%) who have a pension would prefer to use online tools for financial advice than speak to a financial adviser.
The survey also found that over half (53%) with a pension would use a free online retirement planning tool to help them decide what to do with their pension savings, while a quarter (25%) said they would pay a reasonable fee to use an online retirement planning advice service from a financial services company.
4.4. your business model; v) who developed the automated tool (i.e. an external company or developed internally?); and
LV= offers retirees a range of innovative “at retirement” solutions, including fixed term annuities, enhanced annuities, investment-linked annuities, income drawdown, SIPPs and equity release.
LV= Retirement Wizard is the UK’s (and world’s) first online fully regulated advice service.
In August 2015, LV= announced it had taken a majority stake in Wealth Wizards Limited, the UK based automated advice experts. LV= will inject development capital into Wealth Wizards which will enable the company to deliver on its ambition to develop a widely available ‘white-label’ automated advice platform.
Wealth Wizards launched in 2009 as the first UK robo-adviser. The business aims to make advice accessible to everyone, offering fully regulated independent advice via simple online apps. Wealth Wizards pioneered the combination of chartered financial planning, investment expertise and smart software technology to deliver accessible digital expert advice.
4.5. the size of your activity and/or forecast activity? Our business plans for Wealth Wizards and automated advice remain company confidential. However, in broad terms we believe there is significant potential for LV and WW to provide automated advice solutions for 1,000,000 users by 2020.
Initial interest in our propositions and capability supports this view. The outcome of the Financial Advice and Market Review (FAMR) and the extent to which this accelerates the demand and supply of affordable advice solutions will be significantly influential in the speed of normalisation of automated advice.
In addition to this, our national regulator has established a role for itself in looking to support innovation, including automated financial advice models, through its Project Innovate initiative. Project Innovate offers support to firms looking to bring new product or service propositions to market, offering greater understanding of the regulatory framework and help for firms looking for regulatory authorisation. The Project Innovate initiative has had 39 firms seek assistance on potential implementation of ‘robo advice’ systems, technology or services in the retail investment market since its launch in October 2014. They have also held a ‘robo-advice’ forum in September 2015 and have plans for a regulatory sandbox, the report on which refers in a case study to ‘robo-advice’ as a potential option for testing.
The new tool we have developed makes advice accessible and affordable. The cost is £199 for a fully regulated advice report and money back guarantee. The service is designed to help the mass unadvised in the UK to get more from their hard earned pension savings through an online based journey that engages, educates and provides convenient and low cost advice for customers.
With complex choices, such as deciding on which retirement income product to purchase, automated financial advice processes could, for example, deliver higher cost savings because the consumer would have traditionally had to seek financial advice from an IFA, which tends to be more expensive (see answer to question 9).
Our new tool makes advice accessible and affordable. The cost is £199 for a fully regulated advice suitability report and a money back guarantee. The service is designed to help the mass unadvised in the UK to get more from their hard earned pension savings through an online based journey that engages, educates and provides convenient and low cost advice for customers.
The Retirement Wizard generates fully regulated (not simplified) advice suitability reports for pension savers that make personalised recommendations on the specific products they should purchase from their retirement savings to secure a retirement income based on a holistic assessment of their circumstances, needs and personal preferences. An example report is enclosed with this submission.
As with our answer to question 8, where tools help and empower consumers to deal with making more intricate decisions, the benefits to financial institutions in the form of cost savings could be higher. This is because this variety of decision would usually in a non-automated format require a lengthier and more human resource intensive process. By using automated fact finds and reducing the number of employees required to assess a customer’s needs, firms can deliver higher cost savings and resource efficiencies.
The Retirement Wizard generates fully regulated (not simplified) advice suitability reports for pension savers that make personalised recommendations on the specific products they should purchase from their retirement savings to secure a retirement income based on a holistic assessment of their circumstances, needs and personal preferences. An example report is enclosed with this submission.
Paragraph 50: it is arguable that the advice provided at the end of an automated process is more consistent and intelligible than when a person or number of people, whose description of the advice could differ, both in terms of content and tone of delivery. Although, for some consumers will still prefer human interaction, such as in clarifying questions, receiving advice, and fulfilling instructions.
Paragraph 51: this risk can apply to any service where some form of warning or disclaimer is required. We would challenge the assumption that because a person is explaining the disclaimer verbally that a customer would necessarily pay any more attention than seeing it in writing as part of an automated process. In fact, systems online can be used to monitor how long a consumer spends looking at a disclaimer, for example monitoring the speed they take to accept it. A safeguard could be developed to signpost a consumer monitored to have quickly accepted a disclaimer to the fact that the information contained in it is important.
Paragraph 52 – 53: the risk that a consumer could disclose the wrong information can equally apply to online automated processes as it can to verbal disclosure. This applies to both the consumer accidentally, or intentionally, disclosing inaccurate information to the person receiving it verbally or inputting it incorrectly. As such, it is arguable that an automated approach diminishes the risk as the process is dependent on the consumer providing the information. In addition, we are aware that automated forms of advice can be designed to have safeguards which can often spot inconsistencies in information disclosure and consequently halt the process and trigger human intervention.
Paragraph 56: this risk could apply to any advice process. We would also strongly argue that it is common sense that the output from an advice process is always based on a customer’s circumstances at the time and the information that they provided at the time. In terms of reassessment, it would likely be simpler and more convenient for an automated process to contact a customer electronically and be signposted towards a reassessment than it would with a human process.
Paragraphs 57-59: these risks are generally covered by MiFID II and domestically in the UK the regulatory rules resulting from the Retail Distribution Review. These rules apply to automated advice processes as well as human processes.
Paragraph 60: this risk could apply to any advice process. In the UK, it is an observed problem that consumers are not always necessarily clear what form of advice it is that they are receiving, be it information, guidance or regulated advice. In February 2015, the ABI commissioned Ideas42, a behavioural design and consulting firm, to undertake an assessment of the behavioural perspectives associated with retirement planning. The findings suggest that many consumers appear to interpret the term ‘advice’ liberally, covering a range from full regulated advice from an Independent Financial Advisor, to recommendations from unregulated commentators, or on online forums. Consumer confusion about the type of advice they are receiving is not therefore specific to automated advice.
In addition, as we highlight in answer to question 1, the Paper suggests in paragraph 27 that ‘most comparison websites’ are out of scope, yet notes them as presenting a risk in paragraph 60, when they have certain characteristics. We appreciate that the Paper, for the purposes of its scope, considers advice from the point of view of the consumer, and as we note above a consumer may consider the output as advice, but we do not consider price comparison websites, or other digital tools, as generally providing advice as defined by regulation in the UK.
Paragraph 65: this risk should be mitigated against once the Online Dispute Resolution platform is operational.
Paragraph 66: this risk could apply to any advice process, and also to any scenario where a consumer discloses information. As with our comment on paragraph 51 above, a consumer could equally ignore a verbal disclaimer as a written one. However through automated processes, the customer’s interaction with a disclaimer can be monitored and assistance provided.
Paragraph 68-69: we agree that this could be a risk and would highlight that assumptions could, for example, not take account of use of an automated process by a vulnerable consumer.
Paragraphs 72-73: we agree that this is a risk, but would highlight that human advisers could also deliver inaccurate or flawed advice, maliciously or otherwise.
Paragraph 75: this risk could apply to other advice processes. We appreciate that a human interaction may drive a customer to make a choice, but equally the customer may suffer the same inertia in acting on the advice as with an automated process were a transactional capability not available. It is arguable however that a human intervention at the end decision point may be more persuasive in overcoming inertia.
In the UK, there is a growing culture of buying many goods and services online, including financial services products and services. In 2014, the proportion of UK citizens who made an online purchase in the last year was the highest amongst EU member states at 79%, a substantial increase on the 44% reported in 2005. On the whole, in the UK, levels of access to the internet are also generally high compared to other member states. EU statistics show that 89% of the UK population use the internet, and that 73% of the UK population have sufficient digital skills to operate effectively online. In Q1 2015, almost all adults aged 16 to 24 years were recent internet users (99%). In the future therefore it is likely that younger generations will find the option to use automated forms of financial advice appealing and natural.
In terms of how comfortable consumers felt purchasing and managing financial services products, ABI commissioned research from May 2014 showed that of those surveyed, 70% had used the internet, via website or email, to administer and/or keep track of their finances, and that 68% felt comfortable doing so. These were the highest levels of use and comfort out of all options posed, including face to face, on the phone, and by post. As such, there are clear signs that consumers are already quite comfortable using digital channels to buy and interact with financial services and products.
Given the benefits of automated financial advice models, there are signs that it will continue to grow in prominence. This trend is also supported by the UK government and our national regulator. The role of automated financial advice in delivering lower cost advice to consumers represents a key consideration in the ongoing Financial Advice Market Review (FAMR), which our national regulator will report back on its conclusions on the 16th March 2016. FAMR includes an ambition to look at the opportunities and challenges presented by new and emerging technologies to provide cost effective, efficient and user friendly advice services, including automated financial advice (‘robo advice’). This is a sentiment echoed publically by UK Treasury Ministers.
In addition to this, our national regulator has established a role for itself in looking to support innovation, including automated financial advice models, through its Project Innovate initiative. Project Innovate offers support to firms looking to bring new product or service propositions to market, offering greater understanding of the regulatory framework and help for firms looking for regulatory authorisation. The Project Innovate initiative has had 39 firms seek assistance on potential implementation of ‘robo advice’ systems, technology or services in the retail investment market since its launch in October 2014. They have also held a ‘robo-advice’ forum in September 2015 and have plans for a regulatory sandbox, the report on which refers in a case study to ‘robo-advice’ as a potential option for testing.
LV supports the UK Government’s and national regulators’ work in encouraging the emergence of new, innovative approaches to delivering automated forms of financial advice. Automated advice approaches will not be suitable for all consumers, but supporting the infrastructure to deploy these approaches is essential for the increasing numbers of consumers who are and will be more comfortable using digital, rather than traditional advice channels.
With regards to the demand side factors identified in paragraph 88, we would broadly agree with the assessment. However, we would also highlight various behavioural biases which should be taken into account when approaching financial decisions, including access to advice and automated advice. The Ideas42 report commissioned by the ABI into behavioural insights associated with Pension Freedom and Choice highlights a range of behavioural biases which could drive consumers away from accessing advice. While these could apply to both ‘human advice’ and automated forms of advice, they should be considered in giving an insight into how the market may evolve. These biases include:
• A lack of engagement: consumers are often disengaged from the retirement planning process and tend to turn their attention toward it close to retirement age, often making last minute decisions. This can result from failing to allow enough time to assess the wide range of information available to them, acting on recommendations from a Pension Wise session, or find and appoint an Independent Financial Adviser.
• Avoidance and denial: consumers often avoid difficult or challenging tasks, especially if they feel ill-equipped to deal with them. This thought process can apply to retirement planning, especially where there are a significant number of unknown and unpredictable elements, such as longevity.
• Overconfidence in ability to manage money wisely: consumers can be ‘overconfident’ in their ability to manage their finances which can lead to poor decision making, and potentially overlooking advice they have received.
• Availability bias: consumers tend to believe that an event is more likely to take place because it is more easily recalled. In the case of advice, this could mean consumers are less likely to follow or trust advice because of, for example, coverage of misselling cases.
• ‘Hassle’ factors: these are often seemingly small hurdles, such as the requirement to fill out a form, which prevents a consumer from doing something that would ultimately be beneficial for them. the retirement planning process contains numerous hassle factors, including the effort involved in reading the wide range of information available, and making and attending a Pension Wise or an Independent Financial Adviser appointment.
• Choice and information ‘overload’: the wide range of choice in the new retirement market in the UK and the sources of information available to consumers can put them off from engaging in the retirement planning process entirely.
• Ambiguity aversion: this is the tendency for consumers to want to avoid ambiguity. This can play a role in the retirement income search process, where consumers will avoid sources of information where its intention, impartiality, and legitimacy is ambiguous, even if these sources of information are helpful.
Clear and innovative approaches to automated financial advice are already occurring in the UK and further development is supported by the UK Government and our national regulator.
The UK market is unique in terms of its exposure to automated financial advice models, as defined by this Paper, and in terms of developing new propositions which can offer full advice to help consumers with complex decisions.
We support the ESA’s focus on this area, but any assessment needs to take account of the varying levels of development of automated financial advice processes across the EU member states, the differing consumer attitudes to using digital distribution channels, the variations in characteristics of automated financial advice processes which are currently in operation, and the different regulatory approaches taken.
LV= is the UK's largest friendly society and a leading financial mutual. We serve 5.7 million customers with a range of financial products and employ over 6,000 people. We offer a wide range of financial services including general insurance, investment and retirement products. We offer our services direct to consumers and through IFAs and brokers, and through strategic partnerships with organisations such as ReAssure and Nationwide Building Society.
LV= offers retirees a range of innovative “at retirement” solutions, including fixed term annuities, enhanced annuities, investment-linked annuities, income drawdown, SIPPs and equity release.
In June 2015, in direct response to the growing need for affordable advice to help individuals make the most of the UK’s new pension freedoms, we launched the LV= Retirement Wizard, the UK’s first ever fully regulated online advice service.
The new tool makes advice accessible and affordable. The cost is £199 for a fully regulated advice suitability report and a money back guarantee. The service is designed to help the mass unadvised in the UK to get more from their hard earned pension savings through an online based journey that engages, educates and provides convenient and low cost advice for customers. The cost of the Retirement Wizard could be materially reduced where there is no cost of customer acquisition and high volume demand.
For an additional optional fee of £499, LV= will complete all the fulfilment arrangements recommend in the report but customers can also do this themselves, or through another adviser. We explain the cost of “fulfilment” over the telephone with a customer to ensure they understand this is an additional and optional cost. LV= wants advice to be available and affordable to everyone and this new service can be white labelled for other organisations to help deliver this. It has the capacity to be delivered by: Government; Pension Wise partners; through employers; or insurers to ensure maximum reach. The cost can be materially reduced where there is no cost of customer acquisition and where there is high volume.
The new service, which we have shared with our national regulator the Financial Conduct Authority (FCA) from concept throughout its development to market launch, takes the best of new technology through powerful unique algorithms to reduce costs and improve convenience and mixes it with additional online, video and telephone based advisor support to help ensure the recommendations are the right ones for the customer and available with human contact and support. We describe this as technology with a very human touch.
The Retirement Wizard generates fully regulated (not simplified) advice suitability reports for pension savers that make personalised recommendations on the specific products they should purchase from their retirement savings to secure a retirement income based on a holistic assessment of their circumstances, needs and personal preferences. An example report is enclosed with this submission.
The Retirement Wizard ensures consumers have access to a range of solutions from the market by selecting a product, or combination of products, from a panel of providers including LV=, Prudential, Just Retirement, AVIVA, Retirement Advantage, Hodge, Canada Life, Legal & General and Blackrock.
We are in advance commercial discussions with a range of different businesses and organisations (from employers through to employee benefit schemes and product manufacturers) to roll this out in a white-labelled capacity.
In August 2015, LV= announced it had taken a majority stake in Wealth Wizards Limited, the UK based automated advice experts. LV= has injected development capital into Wealth Wizards which will enable the company to deliver on its ambition to develop a widely available ‘white-label’ automated advice platform.
Wealth Wizards launched in 2009 as the first UK robo-adviser. The business aims to make advice accessible to everyone, offering fully regulated independent advice via simple online service. Wealth Wizards pioneered the combination of chartered financial planning, investment expertise and smart software technology to deliver accessible digital expert advice.
Automated personal recommendations are generated by algorithms which, in the case of investment advice, score all the answers and produce a bespoke diversified portfolio matching the customer’s risk profile. The algorithms allow for affordable, consistent and regulated pension advice delivered in a short period of time – an effective solution to fill the ‘advice gap’.
Wealth Wizards works in partnership with employers as part of their employee benefits package, as well as alongside pension consultants to offer pension and retirement advice to company employees. It is also available as a white label solution and direct to consumers.
Our combined capability with Wealth Wizards will, we believe, enable us to create a true automated advice platform functioning across savings and investments, pension accumulation and decumulation, borrowing and protection which will enable new, lower cost and more convenient advice solutions to be brought to market to engage and help mass market customers get more from their hard earned savings.
As we have launched the UK’s (and world’s) first online fully regulated advice service, we believe we are well placed to offer a unique perspective on the issues raised as part of the review. In addition, Wealth Wizards, which LV= has purchased a majority stake in, has unique insight and experience in providing automated retirement solutions. As a retirement income product provider offering a range of products we also have insight of current consumer behaviour.
LV=’s views are based on direct consumer and IFA engagement we have had to date around the impact of the UK pensions freedoms as well as qualitative and quantitative consumer research we have commissioned to gain insight into needs of individuals approaching or at retirement and their awareness, knowledge and views around financial advice.
We would welcome the opportunity to demonstrate in person to ESAs our unique online fully regulated advice service, how it works in practice, it’s white label capacity and the positive customer feedback we have had to date. If this is of interest, please do contact us - our contact details are included at the end of this submission.
1. Do you agree with the assessment of the characteristics of automated financial advice tools presented in this Discussion Paper? If not, please explain why.
Automated advice in financial services varies greatly across sectors and EU member states, with some markets being significantly more advanced than others. It is therefore important that any assessment made by the ESAs considers the stark differences between member states.We would broadly agree with the European Supervisory Authorities’ (ESAs) description of ‘automated financial advice’, however when looking at its application, we would caution that the scope may be too wide. It also important for the ESAs to be mindful that the concept of ‘advice’ in general is at the centre of debate in the UK as we await the FCA response to their Financial Advice Market Review (FAMR) call for evidence, the initial response is expected on the 16 March 2016.
Taking a wide interpretation of ‘automated financial advice’ may create unintended consequences.
It is problematic that the ESAs have not defined ‘automated financial advice’ from an agreed EU legislative definition. Therefore the perspective on this is not robust, or legally sound, as it would be entirely subjective, and is limitless.
It would therefore be advisable for the ESAs to use existing agreed EU legal definitions, for example as set out in MiFID II.
There is a clear distinction between regulated ‘financial advice’ (automated or otherwise), and ‘guidance’ or ‘information’ for consumers, which is based on the Markets in Financial Instruments Directive II (MiFID II). As a result, we would not consider some examples presented by the ESAs as ‘automated financial advice’, notably Price Comparison Websites (PCWs), automatic quote generators or decision tree processes. Instead, we would consider these to be tools to be used by consumers to help ‘guide’ or ‘inform’ them, opposed to offering any ‘advice’ or personal recommendation.
Lack of clarity whether comparison websites are in scope -
While we appreciate that the ESAs are consulting on what constitutes ‘automated financial advice’, we would point to a lack of consistency of whether ‘comparison websites’ ought to be included in the scope. For example, on page 14, paragraph 27, it is suggested that ‘most comparison websites’ are out of scope, yet on page 23, paragraph 60, they are presented as being a risk when they have certain characteristics.
From the UK’s perspective, we would not consider comparison websites in the General Insurance space to be in scope of ‘automated financial advice’ as these tools present options, opposed to making personal recommendations, to consumers. It is common place in the UK for these services to cover more complex products without there being advice involved. Indeed some Independent Financial Adviser (IFAs) and other intermediaries make use of comparison websites to engage, educate and inform customers without advice being delivered.
It would be helpful in any future recommendation that the ESAs present for a clearer view to be taken, which takes into account the specific nature of comparison websites in the UK.
Exclusion of digital consumer tools -
‘Digital consumer tools’ should not be in the scope of ‘automated financial advice’ as, in the UK, we would consider these to deliver ‘financial education’ in the form of information and guidance to the consumer. For example, in paragraph 89 of the Paper, online quote generators are considered to be within this scope. However these tools would not be considered to be providing ‘advice’ in the UK.
Automation vs human interaction -
It is important to consider that there are varying levels of automation and human interaction with any ‘automated financial advice’ model. Whilst some processes may be fully automated, others will rely on some form of human interaction, for example in delivering the outcome of the process or querying the customers input. It is also imperative that any new regulations do not constrain innovation in the financial services market.
2. Are there any other relevant characteristics of automated financial advice tools?
Given that automated financial advice, in the sense of offering regulated advice, is in its early stages of development, both in the UK and EU, we would not want to restrict growth or innovation in this area by suggesting any additional relevant characteristics. However, as it is still an evolving market, we recognise that future innovation could present new characteristics over time.3. Are you aware of examples of automated financial advice tools being used in the banking, insurance, and/or securities sectors? Please provide examples, giving details of their operating process.
As we highlight in question 1, we do not fully agree with the definition of ‘automated financial advice’ as presented in the Paper.We believe that the UK market is ahead of other EU Member States in developing automated financial advice propositions and in terms of consumer use of these processes. Indeed, in respect of a system that delivers full financial advice with a personal recommendation for a retirement income product, the UK can be seen to be a world leader.
In terms of the scope of this Paper, insurers and long term savings firms operate a range of Price Comparison Websites, automated comparison tools, automated quote generators, and other educational tools and calculators, none of which provide financial advice.
4. Do you offer/are you considering offering automated financial advice tools as part of your business model? If so, please briefly describe: i) what type of entity you are, e.g., long established, start-up, a product provider, an intermediary; ii) the service you provide (e.g. to what extent do you integrate human interaction in the tool you provide?); iii) the nature of your clients; iv) your business model; v) who developed the automated tool (i.e. an external company or developed internally?); and vi) the size of your activity and/or forecast activity?
We have launched the UK’s (and world’s) first online fully regulated advice service, we believe we are well placed to offer a unique perspective on the issues raised as part of the review. In addition, Wealth Wizards, which LV= has purchased a majority stake in, has unique insight and experience in providing automated retirement solutions. As a retirement income product provider offering a range of products we also have insight of current consumer behaviour.4.1. what type of entity you are, e.g., long established, start-up, a product provider, an intermediary;
LV= is the UK's largest friendly society and a leading financial mutual. We serve 5.7 million customers with a range of financial products and employ over 6,000 people. We offer a wide range of financial services including general insurance, investment and retirement products. We offer our services direct to consumers and through IFAs and brokers, and through strategic partnerships with organisations such as ReAssure and Nationwide Building Society.
4.2. the service you provide (e.g. to what extent do you integrate human interaction in the tool you provide?);
In June 2015, in direct response to the growing need for affordable advice to help individuals make the most of the new pension freedoms, we launched the LV= Retirement Wizard, the UK’s first ever fully regulated online advice service.
The new service, which we have shared with the FCA throughout its development, takes the best of new technology through powerful algorithms to reduce costs and improve convenience and mixes it with additional online, video and telephone based advisor support to help ensure the recommendations are the right ones for the customer and available with human contact and support. We describe this as technology with a very human touch.
The new tool makes advice accessible and affordable. The cost is £199 for a fully regulated advice report and money back guarantee. The service is designed to help the mass unadvised in the UK to get more from their hard earned pension savings through an online based journey that engages, educates and provides convenient and low cost advice for customers.
4.3. the nature of your clients;
LV= and Wealth Wizards work in partnership with employers as part of their employee benefits package, as well as alongside pension consultants to offer pension and retirement advice to company employees. It is also available as a white label solution and direct to consumers via insurers and pensions schemes.
B&CE, provider of The People’s Pension, has joined forces with retirement specialists LV= to offer an online planning service to members approaching retirement.
From March 2016, the 2.3 million members of The People’s Pension and the historic construction industry scheme EasyBuild will now have the option to make use of the innovative and easy to use online solution if they don’t want to seek traditional financial advice.
Members will be able to access a free guidance report setting out four possible uses for their pot and how long it could last, and a personalised online retirement advice service costing just £49. They will still be signposted to traditional advice routes first, but the online tool will help fill the advice gap for those who don’t want to use them.
The new service launches in the wake of new YouGov research for The People’s Pension which found that only one in five of the general public (18%) currently use a financial adviser. Nearly three in ten (30%) who have a pension would prefer to use online tools for financial advice than speak to a financial adviser.
The survey also found that over half (53%) with a pension would use a free online retirement planning tool to help them decide what to do with their pension savings, while a quarter (25%) said they would pay a reasonable fee to use an online retirement planning advice service from a financial services company.
4.4. your business model; v) who developed the automated tool (i.e. an external company or developed internally?); and
LV= offers retirees a range of innovative “at retirement” solutions, including fixed term annuities, enhanced annuities, investment-linked annuities, income drawdown, SIPPs and equity release.
LV= Retirement Wizard is the UK’s (and world’s) first online fully regulated advice service.
In August 2015, LV= announced it had taken a majority stake in Wealth Wizards Limited, the UK based automated advice experts. LV= will inject development capital into Wealth Wizards which will enable the company to deliver on its ambition to develop a widely available ‘white-label’ automated advice platform.
Wealth Wizards launched in 2009 as the first UK robo-adviser. The business aims to make advice accessible to everyone, offering fully regulated independent advice via simple online apps. Wealth Wizards pioneered the combination of chartered financial planning, investment expertise and smart software technology to deliver accessible digital expert advice.
4.5. the size of your activity and/or forecast activity? Our business plans for Wealth Wizards and automated advice remain company confidential. However, in broad terms we believe there is significant potential for LV and WW to provide automated advice solutions for 1,000,000 users by 2020.
Initial interest in our propositions and capability supports this view. The outcome of the Financial Advice and Market Review (FAMR) and the extent to which this accelerates the demand and supply of affordable advice solutions will be significantly influential in the speed of normalisation of automated advice.
5. Do you consider there are barriers preventing you from offering/developing automated financial advice tools in the banking, insurance and securities sectors? If so, which barriers?
We experienced no barriers to developing the UK’s (and world’s) first online fully regulated advice service. We found working with the FCA from concept throughout its development to market launch a straight forward and supportive process. There were no aspect of the FCA rules that need to change or waivers issued to deliver the UK’s (and world’s) first online fully regulated advice service.In addition to this, our national regulator has established a role for itself in looking to support innovation, including automated financial advice models, through its Project Innovate initiative. Project Innovate offers support to firms looking to bring new product or service propositions to market, offering greater understanding of the regulatory framework and help for firms looking for regulatory authorisation. The Project Innovate initiative has had 39 firms seek assistance on potential implementation of ‘robo advice’ systems, technology or services in the retail investment market since its launch in October 2014. They have also held a ‘robo-advice’ forum in September 2015 and have plans for a regulatory sandbox, the report on which refers in a case study to ‘robo-advice’ as a potential option for testing.
6. Do you consider the potential benefits to consumers to be accurately described? If not, please explain why.
We would broadly agree with the potential benefits to consumers which the Paper highlights. Although we would reiterate that given that automation in financial advice is still in its early stages of development, both in the UK and across the EU, there may be other benefits which we are unable to foresee. The UK can be seen to be a world leader in respect of fully regulated advice service.7. Are you aware of any additional benefits to consumers? If so, please describe them.
Given that automation in financial advice is still in its early stages of development, both in the UK and across the EU, there may be other benefits which we are unable to foresee at this stage. The UK can be seen to be a world leader in respect of fully regulated advice service.The new tool we have developed makes advice accessible and affordable. The cost is £199 for a fully regulated advice report and money back guarantee. The service is designed to help the mass unadvised in the UK to get more from their hard earned pension savings through an online based journey that engages, educates and provides convenient and low cost advice for customers.
8. Do you see any differences in the potential benefits arising for consumers in each of the banking, insurance and securities sectors?
The key differences of how potential benefits are distributed will largely depend on the automated financial advice model being considered, and the complexity of the decision that the tool is being used for.With complex choices, such as deciding on which retirement income product to purchase, automated financial advice processes could, for example, deliver higher cost savings because the consumer would have traditionally had to seek financial advice from an IFA, which tends to be more expensive (see answer to question 9).
9. Have you observed any of these potential benefits to consumers? If so, please provide examples and describe the kind of benefit that has accrued.
We experienced no barriers to developing the UK’s (and world’s) first online fully regulated advice service. The new tool makes advice accessible and affordable. The cost is £199 for a fully regulated advice suitability report with a money back guarantee. The service is designed to help the mass unadvised in the UK to get more from their hard earned pension savings through an online based journey that engages, educates and provides convenient and low cost advice for customers.10. Do you consider the potential benefits to financial institutions to be accurately described? If not, please explain why.
We would broadly agree with the potential benefits to financial institutions which the Paper highlights. However, given that automation in financial advice is still in its early stages of development, both in the UK and across the EU, there may be other benefits which we are unable to foresee. The UK can be seen to be a world leader in respect of fully regulated advice service.11. Are you aware of any additional benefits to financial institutions? If so, please describe them.
The use of technology also provides financial institutions with the ability to provide scalable services to customers without the significant overhead costs of employing a large number qualified human adviser. A cost which in turn needs to be borne by the customer, that makes the cost of financial advice cost prohibitive on many customers.Our new tool makes advice accessible and affordable. The cost is £199 for a fully regulated advice suitability report and a money back guarantee. The service is designed to help the mass unadvised in the UK to get more from their hard earned pension savings through an online based journey that engages, educates and provides convenient and low cost advice for customers.
The Retirement Wizard generates fully regulated (not simplified) advice suitability reports for pension savers that make personalised recommendations on the specific products they should purchase from their retirement savings to secure a retirement income based on a holistic assessment of their circumstances, needs and personal preferences. An example report is enclosed with this submission.
12. Do you see any differences in the potential benefits arising for financial institutions in each of the banking, insurance and securities sectors?
The differences in potential benefits are likely to be felt more in sectors where automation is not currently commonplace. In insurance, automated processes are fairly commonplace, however we recognise in pensions and securities, there is growing potential and as such benefits will likely be felt stronger here as new models come to market.As with our answer to question 8, where tools help and empower consumers to deal with making more intricate decisions, the benefits to financial institutions in the form of cost savings could be higher. This is because this variety of decision would usually in a non-automated format require a lengthier and more human resource intensive process. By using automated fact finds and reducing the number of employees required to assess a customer’s needs, firms can deliver higher cost savings and resource efficiencies.
13. Have you observed any of these potential benefits to financial institutions? If so, please provide examples and describe the kind of benefit that has accrued.
Our new tool makes advice accessible and affordable. The cost is £199 for a fully regulated advice suitability report and a money back guarantee. The service is designed to help the mass unadvised in the UK to get more from their hard earned pension savings through an online based journey that engages, educates and provides convenient and low cost advice for customers.The Retirement Wizard generates fully regulated (not simplified) advice suitability reports for pension savers that make personalised recommendations on the specific products they should purchase from their retirement savings to secure a retirement income based on a holistic assessment of their circumstances, needs and personal preferences. An example report is enclosed with this submission.
14. Do you agree with the description of the potential risks to consumers identified? If not, explain why.
Paragraphs 48-49: the Paper states that the risks highlighted are more likely to be higher when automated advice processes are involved rather than with human advice processes, although it admits that there is overlap. While we feel that some of the risks highlighted could be higher with automated processes, we question whether some of them can be attributed more generally, and in fact whether some should be classified as risks at all.Paragraph 50: it is arguable that the advice provided at the end of an automated process is more consistent and intelligible than when a person or number of people, whose description of the advice could differ, both in terms of content and tone of delivery. Although, for some consumers will still prefer human interaction, such as in clarifying questions, receiving advice, and fulfilling instructions.
Paragraph 51: this risk can apply to any service where some form of warning or disclaimer is required. We would challenge the assumption that because a person is explaining the disclaimer verbally that a customer would necessarily pay any more attention than seeing it in writing as part of an automated process. In fact, systems online can be used to monitor how long a consumer spends looking at a disclaimer, for example monitoring the speed they take to accept it. A safeguard could be developed to signpost a consumer monitored to have quickly accepted a disclaimer to the fact that the information contained in it is important.
Paragraph 52 – 53: the risk that a consumer could disclose the wrong information can equally apply to online automated processes as it can to verbal disclosure. This applies to both the consumer accidentally, or intentionally, disclosing inaccurate information to the person receiving it verbally or inputting it incorrectly. As such, it is arguable that an automated approach diminishes the risk as the process is dependent on the consumer providing the information. In addition, we are aware that automated forms of advice can be designed to have safeguards which can often spot inconsistencies in information disclosure and consequently halt the process and trigger human intervention.
Paragraph 56: this risk could apply to any advice process. We would also strongly argue that it is common sense that the output from an advice process is always based on a customer’s circumstances at the time and the information that they provided at the time. In terms of reassessment, it would likely be simpler and more convenient for an automated process to contact a customer electronically and be signposted towards a reassessment than it would with a human process.
Paragraphs 57-59: these risks are generally covered by MiFID II and domestically in the UK the regulatory rules resulting from the Retail Distribution Review. These rules apply to automated advice processes as well as human processes.
Paragraph 60: this risk could apply to any advice process. In the UK, it is an observed problem that consumers are not always necessarily clear what form of advice it is that they are receiving, be it information, guidance or regulated advice. In February 2015, the ABI commissioned Ideas42, a behavioural design and consulting firm, to undertake an assessment of the behavioural perspectives associated with retirement planning. The findings suggest that many consumers appear to interpret the term ‘advice’ liberally, covering a range from full regulated advice from an Independent Financial Advisor, to recommendations from unregulated commentators, or on online forums. Consumer confusion about the type of advice they are receiving is not therefore specific to automated advice.
In addition, as we highlight in answer to question 1, the Paper suggests in paragraph 27 that ‘most comparison websites’ are out of scope, yet notes them as presenting a risk in paragraph 60, when they have certain characteristics. We appreciate that the Paper, for the purposes of its scope, considers advice from the point of view of the consumer, and as we note above a consumer may consider the output as advice, but we do not consider price comparison websites, or other digital tools, as generally providing advice as defined by regulation in the UK.
Paragraph 65: this risk should be mitigated against once the Online Dispute Resolution platform is operational.
Paragraph 66: this risk could apply to any advice process, and also to any scenario where a consumer discloses information. As with our comment on paragraph 51 above, a consumer could equally ignore a verbal disclaimer as a written one. However through automated processes, the customer’s interaction with a disclaimer can be monitored and assistance provided.
Paragraph 68-69: we agree that this could be a risk and would highlight that assumptions could, for example, not take account of use of an automated process by a vulnerable consumer.
Paragraphs 72-73: we agree that this is a risk, but would highlight that human advisers could also deliver inaccurate or flawed advice, maliciously or otherwise.
Paragraph 75: this risk could apply to other advice processes. We appreciate that a human interaction may drive a customer to make a choice, but equally the customer may suffer the same inertia in acting on the advice as with an automated process were a transactional capability not available. It is arguable however that a human intervention at the end decision point may be more persuasive in overcoming inertia.
15. Do you consider there to be any risks to consumers missing? If so, please explain.
In paragraph 34, the Paper states that a potential benefit for consumer could be the opportunity for them to access a wider range of advice providers ‘including from other jurisdictions’. We consider this to equally present a risk, as consumer knowledge will vary about differing regulatory and consumer protection regimes in other EU member states.16. Do you see any differences in the potential risks arising for consumers in each of the banking, insurance and securities sectors?
We consider that risks are likely to be higher where the products involved are more complex and longer term in nature, for example with pensions and securities. However, the risk profile of these products is generally higher regardless of how they are distributed.17. Have you observed any of these risks causing detriment to consumers? If so, in what way?
We have not observed any of these risks causing detriment to consumers.18. Do you agree with the description of the potential risks to financial institutions identified? If not, explain why.
We would broadly agree with the risks identified in the Paper. However, with regard paragraph 82, this risk could be attributed to any insurer taking a new approach to engaging with consumers, be it a new distribution channel or new advice proposition.19. Do you consider there to be any risks to financial institutions missing? If so, please explain.
We have not observed any additional risks to those included in the Paper.20. Do you see any differences in the potential risks arising for financial institutions in each of the banking, insurance and securities sectors?
Risk to financial institutions will be higher in sectors where more products are sold at a higher cost or higher investment.21. Have you observed any of these risks causing detriment to financial institutions? If so, in what way?
We have not observed any of the risks identified as causing detriment to insurers.22. Would you agree with the assessment of the potential evolution of automated advice? Please provide your reasoning.
We believe that use of automated forms of financial advice will increase as the market evolves, particularly in the insurance and retirement income sector. However as the Paper highlights, development will not necessarily be uniform across the EU member states, and not all consumers will want to or feel comfortable in accessing financial advice in this way.In the UK, there is a growing culture of buying many goods and services online, including financial services products and services. In 2014, the proportion of UK citizens who made an online purchase in the last year was the highest amongst EU member states at 79%, a substantial increase on the 44% reported in 2005. On the whole, in the UK, levels of access to the internet are also generally high compared to other member states. EU statistics show that 89% of the UK population use the internet, and that 73% of the UK population have sufficient digital skills to operate effectively online. In Q1 2015, almost all adults aged 16 to 24 years were recent internet users (99%). In the future therefore it is likely that younger generations will find the option to use automated forms of financial advice appealing and natural.
In terms of how comfortable consumers felt purchasing and managing financial services products, ABI commissioned research from May 2014 showed that of those surveyed, 70% had used the internet, via website or email, to administer and/or keep track of their finances, and that 68% felt comfortable doing so. These were the highest levels of use and comfort out of all options posed, including face to face, on the phone, and by post. As such, there are clear signs that consumers are already quite comfortable using digital channels to buy and interact with financial services and products.
Given the benefits of automated financial advice models, there are signs that it will continue to grow in prominence. This trend is also supported by the UK government and our national regulator. The role of automated financial advice in delivering lower cost advice to consumers represents a key consideration in the ongoing Financial Advice Market Review (FAMR), which our national regulator will report back on its conclusions on the 16th March 2016. FAMR includes an ambition to look at the opportunities and challenges presented by new and emerging technologies to provide cost effective, efficient and user friendly advice services, including automated financial advice (‘robo advice’). This is a sentiment echoed publically by UK Treasury Ministers.
In addition to this, our national regulator has established a role for itself in looking to support innovation, including automated financial advice models, through its Project Innovate initiative. Project Innovate offers support to firms looking to bring new product or service propositions to market, offering greater understanding of the regulatory framework and help for firms looking for regulatory authorisation. The Project Innovate initiative has had 39 firms seek assistance on potential implementation of ‘robo advice’ systems, technology or services in the retail investment market since its launch in October 2014. They have also held a ‘robo-advice’ forum in September 2015 and have plans for a regulatory sandbox, the report on which refers in a case study to ‘robo-advice’ as a potential option for testing.
LV supports the UK Government’s and national regulators’ work in encouraging the emergence of new, innovative approaches to delivering automated forms of financial advice. Automated advice approaches will not be suitable for all consumers, but supporting the infrastructure to deploy these approaches is essential for the increasing numbers of consumers who are and will be more comfortable using digital, rather than traditional advice channels.
With regards to the demand side factors identified in paragraph 88, we would broadly agree with the assessment. However, we would also highlight various behavioural biases which should be taken into account when approaching financial decisions, including access to advice and automated advice. The Ideas42 report commissioned by the ABI into behavioural insights associated with Pension Freedom and Choice highlights a range of behavioural biases which could drive consumers away from accessing advice. While these could apply to both ‘human advice’ and automated forms of advice, they should be considered in giving an insight into how the market may evolve. These biases include:
• A lack of engagement: consumers are often disengaged from the retirement planning process and tend to turn their attention toward it close to retirement age, often making last minute decisions. This can result from failing to allow enough time to assess the wide range of information available to them, acting on recommendations from a Pension Wise session, or find and appoint an Independent Financial Adviser.
• Avoidance and denial: consumers often avoid difficult or challenging tasks, especially if they feel ill-equipped to deal with them. This thought process can apply to retirement planning, especially where there are a significant number of unknown and unpredictable elements, such as longevity.
• Overconfidence in ability to manage money wisely: consumers can be ‘overconfident’ in their ability to manage their finances which can lead to poor decision making, and potentially overlooking advice they have received.
• Availability bias: consumers tend to believe that an event is more likely to take place because it is more easily recalled. In the case of advice, this could mean consumers are less likely to follow or trust advice because of, for example, coverage of misselling cases.
• ‘Hassle’ factors: these are often seemingly small hurdles, such as the requirement to fill out a form, which prevents a consumer from doing something that would ultimately be beneficial for them. the retirement planning process contains numerous hassle factors, including the effort involved in reading the wide range of information available, and making and attending a Pension Wise or an Independent Financial Adviser appointment.
• Choice and information ‘overload’: the wide range of choice in the new retirement market in the UK and the sources of information available to consumers can put them off from engaging in the retirement planning process entirely.
• Ambiguity aversion: this is the tendency for consumers to want to avoid ambiguity. This can play a role in the retirement income search process, where consumers will avoid sources of information where its intention, impartiality, and legitimacy is ambiguous, even if these sources of information are helpful.
23. How do you think that the market for automation in financial advice will evolve in the near future in the banking, insurance and investment sectors? Please also provide details of any relevant data or information to support your views, where available.
Automated financial advice is already established in the general insurance market in the UK, but we consider that automation of financial advice will increase in the pensions, retirement income and securities markets as well.Clear and innovative approaches to automated financial advice are already occurring in the UK and further development is supported by the UK Government and our national regulator.
24. Are there any other comments you would like to convey on the topic of automation in financial advice?
LV= welcomes the opportunity to respond to ESAs joint committee discussion paper on automated advice. We hope we can continue to work constructively with ESAs as the discussion progresses and offer our input and unique expertise to help meet the objectives that ESAs is seeking to achieve.The UK market is unique in terms of its exposure to automated financial advice models, as defined by this Paper, and in terms of developing new propositions which can offer full advice to help consumers with complex decisions.
We support the ESA’s focus on this area, but any assessment needs to take account of the varying levels of development of automated financial advice processes across the EU member states, the differing consumer attitudes to using digital distribution channels, the variations in characteristics of automated financial advice processes which are currently in operation, and the different regulatory approaches taken.
LV= is the UK's largest friendly society and a leading financial mutual. We serve 5.7 million customers with a range of financial products and employ over 6,000 people. We offer a wide range of financial services including general insurance, investment and retirement products. We offer our services direct to consumers and through IFAs and brokers, and through strategic partnerships with organisations such as ReAssure and Nationwide Building Society.
LV= offers retirees a range of innovative “at retirement” solutions, including fixed term annuities, enhanced annuities, investment-linked annuities, income drawdown, SIPPs and equity release.
In June 2015, in direct response to the growing need for affordable advice to help individuals make the most of the UK’s new pension freedoms, we launched the LV= Retirement Wizard, the UK’s first ever fully regulated online advice service.
The new tool makes advice accessible and affordable. The cost is £199 for a fully regulated advice suitability report and a money back guarantee. The service is designed to help the mass unadvised in the UK to get more from their hard earned pension savings through an online based journey that engages, educates and provides convenient and low cost advice for customers. The cost of the Retirement Wizard could be materially reduced where there is no cost of customer acquisition and high volume demand.
For an additional optional fee of £499, LV= will complete all the fulfilment arrangements recommend in the report but customers can also do this themselves, or through another adviser. We explain the cost of “fulfilment” over the telephone with a customer to ensure they understand this is an additional and optional cost. LV= wants advice to be available and affordable to everyone and this new service can be white labelled for other organisations to help deliver this. It has the capacity to be delivered by: Government; Pension Wise partners; through employers; or insurers to ensure maximum reach. The cost can be materially reduced where there is no cost of customer acquisition and where there is high volume.
The new service, which we have shared with our national regulator the Financial Conduct Authority (FCA) from concept throughout its development to market launch, takes the best of new technology through powerful unique algorithms to reduce costs and improve convenience and mixes it with additional online, video and telephone based advisor support to help ensure the recommendations are the right ones for the customer and available with human contact and support. We describe this as technology with a very human touch.
The Retirement Wizard generates fully regulated (not simplified) advice suitability reports for pension savers that make personalised recommendations on the specific products they should purchase from their retirement savings to secure a retirement income based on a holistic assessment of their circumstances, needs and personal preferences. An example report is enclosed with this submission.
The Retirement Wizard ensures consumers have access to a range of solutions from the market by selecting a product, or combination of products, from a panel of providers including LV=, Prudential, Just Retirement, AVIVA, Retirement Advantage, Hodge, Canada Life, Legal & General and Blackrock.
We are in advance commercial discussions with a range of different businesses and organisations (from employers through to employee benefit schemes and product manufacturers) to roll this out in a white-labelled capacity.
In August 2015, LV= announced it had taken a majority stake in Wealth Wizards Limited, the UK based automated advice experts. LV= has injected development capital into Wealth Wizards which will enable the company to deliver on its ambition to develop a widely available ‘white-label’ automated advice platform.
Wealth Wizards launched in 2009 as the first UK robo-adviser. The business aims to make advice accessible to everyone, offering fully regulated independent advice via simple online service. Wealth Wizards pioneered the combination of chartered financial planning, investment expertise and smart software technology to deliver accessible digital expert advice.
Automated personal recommendations are generated by algorithms which, in the case of investment advice, score all the answers and produce a bespoke diversified portfolio matching the customer’s risk profile. The algorithms allow for affordable, consistent and regulated pension advice delivered in a short period of time – an effective solution to fill the ‘advice gap’.
Wealth Wizards works in partnership with employers as part of their employee benefits package, as well as alongside pension consultants to offer pension and retirement advice to company employees. It is also available as a white label solution and direct to consumers.
Our combined capability with Wealth Wizards will, we believe, enable us to create a true automated advice platform functioning across savings and investments, pension accumulation and decumulation, borrowing and protection which will enable new, lower cost and more convenient advice solutions to be brought to market to engage and help mass market customers get more from their hard earned savings.
As we have launched the UK’s (and world’s) first online fully regulated advice service, we believe we are well placed to offer a unique perspective on the issues raised as part of the review. In addition, Wealth Wizards, which LV= has purchased a majority stake in, has unique insight and experience in providing automated retirement solutions. As a retirement income product provider offering a range of products we also have insight of current consumer behaviour.
LV=’s views are based on direct consumer and IFA engagement we have had to date around the impact of the UK pensions freedoms as well as qualitative and quantitative consumer research we have commissioned to gain insight into needs of individuals approaching or at retirement and their awareness, knowledge and views around financial advice.
We would welcome the opportunity to demonstrate in person to ESAs our unique online fully regulated advice service, how it works in practice, it’s white label capacity and the positive customer feedback we have had to date. If this is of interest, please do contact us - our contact details are included at the end of this submission.