High earners log-on for robo-advice
25 April 2017
- More than half of high earners would pay for robo-advice, compared with just under one-third on incomes of less than £15,000;
- 15 million consumers willing to pay for robo-advice;
- Demand highest in millennials, but older demographics show potential for using robo-advice; and,
- Trust cited as a main barrier to consumer adoption.
The demand for robo-advice rises with income, despite it being widely seen as a low-cost financial advice solution, according to Deloitte, the business advisory firm.
Deloitte’s research shows over half (51%) of people earning £45,000 to £70,000 would use a robo-adviser for investments, compared with just 30% of those on incomes under £15,000.
Gavin Norwood, insurance partner at Deloitte, said: “There is a significant financial advice gap in the market, where consumers have a need for advice but either can't or won't access it. Robo-advisers are low-cost and will increasingly be seen as a good alternative to face-to-face advice, especially where consumers have less complex needs.
“The need for affordable advice is growing as individuals are increasingly being tasked with managing their own pension pots and, in the context of a relatively low state pension, automated advice can play a key role in generating low-cost options to help. Our research suggests that robo-advice shouldn’t be exclusively aimed at those on lower incomes or that have smaller savings.”
Deloitte’s research shows a significant potential for robo-advice to take off, with 15 million consumers willing to pay for an automated financial advice solution, confirming that in six key financial advice markets1 over a third of consumers would be willing to pay.
Demand is highest amongst millennials, but the research suggests other age brackets could be interested in using robo-advice. Over two-fifths (43%) of 35-44 year old workers with a pension would use robo-advice on pensions, as would one-quarter (24%) for the 45-54 year olds and a fifth (21%) of those aged 55 and above. Also, 35% of defined contribution pension holders – more than three million people – would be willing to pay for robo-advice to invest their pension pots, with demand highest (45%) among those with the smallest pensions pots, many of whom cannot afford traditional advice.
However, Deloitte’s research identifies some key barriers in consumers’ willingness to use robo-advisers.
Norwood continued: "Whilst robo-advice can help close the financial advice gap, financial literacy and trust also have to be increased significantly. The industry needs to communicate the benefits of robo-advice in a simple and engaging way, for example, how robo-advice works in a safe and secure manner, the lower costs and convenience of 24/7 availability. Only then will people become as comfortable with disclosing their financial information to a ‘machine’ as a human.
“To-date robo-advice has focussed on investments, but its potential extends far beyond and the future looks bright as affordable and convenient automated advice users embrace its potential. In five to 10 years, we will probably not use the term ‘robo-advice’ as digital becomes the recognised channel.”
Notes to editors
1 Six markets: Simple Financial Planning; Investing; Defined Contribution Pension saving; At-retirement; Mortgages and Individual Protection.
About the survey
YouGov plc conducted an online survey of 2,046 GB adults on 23-24 January 2017 for Deloitte. The figures have been weighted and are representative of all GB adults (18+). Analysis and population calculations were carried out by Deloitte.
In this press release references to Deloitte are references to Deloitte LLP, which is among the country's leading professional services firms.
Deloitte LLP is the United Kingdom member firm of Deloitte Touche Tohmatsu Limited (“DTTL”), a UK private company limited by guarantee, whose member firms are legally separate and independent entities. Please see www.deloitte.co.uk/about for a detailed description of the legal structure of DTTL and its member firms.
The information contained in this press release is correct at the time of going to press.
Member of Deloitte Touche Tohmatsu Limited.