gfk - robo-advice “build it and they will come”

1© GfK 2016 | Innovatielab – Lessons from abroad

Robo-advice“Build it and they will come” | Martin Grimwood


A panacea for the advice gap?


Creating engagment through a regulatory sandbox and innovation hub


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


And has also encouraged activity from Fintech firms


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?


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


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 FinancialAdviser

Employer

Independent broker

The company direct

Other bank/B'soc


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


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


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


Life is sold, not bought!

But is this in the interest of the (vulnerable)

consumer?

© 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


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


Preference for direct

Actual Direct

RDR, change from commission to fee


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


Preference for direct

Actual Direct

RDR, change from commission to fee


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%


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


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


“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.


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.


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


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


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

gfk - robo-advice “build it and they will come”

Economy & Finance