A glimse into a future where human financial advisors are replaced by "Robo- Advice”, algorithms that provide portfolio management by Matin Grimwood

1. 1© GfK 2016 | Innovatielab – Lessons from abroad
Robo-advice
“Build it and they will come” | Martin Grimwood

2. 2© GfK 2016 | Innovatielab – Lessons from abroad
A panacea for the advice gap?

3. 3© GfK 2016 | Innovatielab – Lessons from abroad
Creating engagment through a regulatory sandbox and innovation hub

4. 4© GfK 2016 | Innovatielab – Lessons from abroad
http://citywire.co.uk/new-model-adviser/news/fca-accepts-nine-firms-into-robo-advice-unit/a952292
Which has been positively received by financial service providers

5. 5© GfK 2016 | Innovatielab – Lessons from abroad
And has also encouraged activity from Fintech firms

6. 6© GfK 2016 | Innovatielab – Lessons from abroad
Ref: table taken from ‘AI – The Potential fro Automated Advisory in the Insurance Industry’,
Puneet Bharal, ACORD & Larry Shapiro, Surely Group, quoting the Oxford University paper
‘The future of employment: how susceptible are jobs to computerisation?@ Carl Benedikt
Frey† and Michael A. Osborne September 17, 2013
Streamlining customer experiences and controlling costs?

7. 7© GfK 2016 | Innovatielab – Lessons from abroad
Base: All 16+ /18+. Time period: Annual data
Sales of retail investments peaked in the late 1990’s and
declined significantly in the early 2000’s
0%
10%
20%
30%
40%
1997 1999 2001 2003 2005 2007 2009 2011 2013 2015
18+
RDR
Lehman Brothers
collapse
Proportion of GB adults holding any investments

8. 8© GfK 2016 | Innovatielab – Lessons from abroad
Distribution channel used to acquire investments
*Scottish widdows includes Lloyds TSB
At its peak in the 1990’s the majority of investments were being sold by
branch staff or through life office owned direct sales people
45
49
39
28
29
7
4
4
3
3
24
1
1
2
2
1
1
3
1
10
11
3
7
6
3
1
1
7
30
32
34
45
57
74
85
86
90
92
57
11
3
19
15
4
14
6
5
4
5
6
0% 20% 40% 60% 80% 100%
Standard Life
Jupiter
Norwich Union
Legal & General
Prudential
Scottish Widows
Barclays
Halifax
Abbey National
Nationwide
Market Independent Financial
Adviser
Employer
Independent broker
The company direct
Other bank/B'soc

9. 9© GfK 2016 | Innovatielab – Lessons from abroad
Base: All 18+. Time period: 12 months rolling
This decline in investment holding coincided with the decline in
bank and life office direct sales channels prior to and after RDR
0,0
1,0
2,0
3,0
4,0
5,0
Jan-06 Jan-08 Jan-10 Jan-12
Serviced
IFA/ tied adviser
From a company salesperson
Distribution channel used to acquire investments

10. 10© GfK 2016 | Innovatielab – Lessons from abroad
Penetration of those taking out investments in last five years
Base: All 18+. Time period: 12 months rolling
And mainly effected mass market investors, the general public
0,0
1,0
2,0
3,0
Jan-06 Jan-08 Jan-10 Jan-12 Jan-14 Jan-16
<£20k
£20-50k
£50-100k
£100k+
RDR

11. 11© GfK 2016 | Innovatielab – Lessons from abroad
Base: All 18+. Time period: Annual data
The same decline is evident in the UK for life insurance, which
also peaked at the end of the 1990’s
0%
10%
20%
30%
40%
50%
1997 1999 2001 2003 2005 2007 2009 2011 2013 2015
18+
Proportion of GB adults holding any life insurance

12. 12© GfK 2016 | Innovatielab – Lessons from abroad
Life is sold, not bought!
But is this in the interest of the (vulnerable)
consumer?
© GfK 2016 | Innovatielab – Lessons from abroad

13. 13© GfK 2016 | Innovatielab – Lessons from abroad
So the FCA thinks Roboadvise can fill the ‘advise gap’. But what can
we learn from the US?
Tech-upstarts Big brand followers

14. 14© GfK 2016 | Innovatielab – Lessons from abroad
Preference for direct investment arrangement vs actual
Base: All 18+ opened investment in last 5 years and considering investment (Wave 2). Time period: 12 months rolling
When faced with a fee for advice mass market investors claim
to prefer a direct route, but have failed to take action
0
20
40
60
80
100
Jan-06 Jan-08 Jan-10 Jan-12 Jan-14 Jan-16
Preference for direct
Actual Direct
RDR, change from commission to fee

15. 15© GfK 2016 | Innovatielab – Lessons from abroad
Preference for direct purchase of life insurance vs actual
Base: All 18+ opened life in last year and considering life (Wave 2). Time period: 12 months rolling
This is also the case for life insurance
0
20
40
60
80
100
Jan-06 Jan-08 Jan-10 Jan-12 Jan-14 Jan-16
Preference for direct
Actual Direct
RDR, change from commission to fee

16. 16© GfK 2016 | Innovatielab – Lessons from abroad
Only 4% would consider robo-advice
Recent research from GfK in the US support these recent
innovations
“It would be important to have someone to
call on the phone to provide guidance if they
were to consider using robo-advice”
“Would trust the advice they get from
computer algorithm more than advice they
would get from a human adviser”
10% 63%

17. 17© GfK 2016 | Innovatielab – Lessons from abroad
Which leads us
nicely on to…bionic advice
© GfK 2016 | Innovatielab – Lessons from abroad

18. 18© GfK 2016 | Innovatielab – Lessons from abroad
Personal Value of “Self-reliance” declined from 4th most important personal value in
2007 to 12th place in 2015.
So is there any evidence that mass market UK investors will
become proactive?
16
12
0
2
4
6
8
10
12
14
16
18
2007 2015
Self-directeds

19. 19© GfK 2016 | Innovatielab – Lessons from abroad
24%
32%
2011 2015
% of UK consumers who agree “Virtual interactions with people and places can be
as good as being there in person” (Top 3 box)
Source: GfK’s Consumer Life Report 2011-2015
That said, virtual interactions are becoming more mainstream
1 in 3 claim that virtual interactions with people can
be as good as being there in person

20. 20© GfK 2016 | Innovatielab – Lessons from abroad
“We believe we will be able to work with Michael Lawrence [from the FCA’s advice
unit] and his team extremely well as we deliver our automated solutions over the
next few months and years”*
* Larry Banda - Director of Financial Planning, Protection and Investments (Money Marketing 3 October 2016)
Nationwide trials in-branch automated advice service
• Nationwide announces it is testing its
automated advice proposition after entering
the FCA’s robo-advice unit.
• Described as “guided advice”:
• customers will go through an automated
process which can deliver a personal
recommendation,
• but they will be assisted by financial
planning managers or other in-branch staff
and may be referred for full face-to-face
advice depending on their needs.

21. 21© GfK 2016 | Innovatielab – Lessons from abroad
Bionic solutions can also be applied to provide better customer
experiences within general insurance
 GI market experiencing decline in customer
satisfaction
 Tech can be an enabler for increased
customer satisfaction, especially at moment
of truth
 An example of this is GfK Claim Manager, a
web based validation tool that allows
insurance companies to:
 Calculate the replacement value of
damaged items.
 Identifies up to three most purchased
products in the retail market which are
comparable in technical features of a
damaged item.

22. 22© GfK 2016 | Innovatielab – Lessons from abroad
Improving customer experience and loyalty through digital technology is
perhaps one way insurers can regain the initiative from PCS
Typical customer insurance pain points
Confusion over cover and price
Multiple insurance types
Built around insurers not
customers
Don’t reward loyalty
Not personalised
Repetitive signup & renewal
My Aviva
TSB Pick and Protect

23. 23© GfK 2016 | Innovatielab – Lessons from abroad
Image sources: ; CC BY-SA 3.0, https://commons.wikimedia.org/w/index.php?curid=140450
Providers launching into the robo market face two key challenges

24. 24© GfK 2016 | Innovatielab – Lessons from abroad
 Robo advice is endorsed by the UK regulator, it is
seen as a technological solution to a side effect of
regulation
 However, it won’t be the panacea for mass market
engagement
 Because the old adage of ‘Life is sold not bought’ is
still true
 That said, there is a place for Bionic solutions:
 to support human sales interactions with clients
 to streamline customer experience touchpoints
 to provide flexibility to more sophisticated
consumers
Key take-outs from the UK