At the beginning of March Royal London pulled off a major coup with the acquisition of automated advice provider Wealth Wizards.
The capability of the Wealth Wizards tool goes far beyond what is offered by virtually all so-called robo advisers, which invariably actually have no real robots nor give any advice. In reality most are mere online sales vehicles for packages of ETFs and other investment strategies. Wealth Wizards is the real deal, a genuine automated advice solution which can address both accumulation and decumulation advice. In this context the company is very well placed to support the many millions of consumers who may need financial advice but cannot afford it.
In recent decades financial advice has rightly become a service delivered by highly qualified professionals. Raising professional standards in the industry comes at an inevitable cost. Highly qualified people deserve to be well paid, but the cost of employing such well-paid people means the services they deliver will be unaffordable for much of the British public.
Quite simply the economics of delivering regulated financial advice by traditional means to people of either modest, or even mass affluent income, simply do not add up. The cost of providing a fully regulated advice process by human advisers is too much for most people to pay unless it is subsidised to the extent that the firm delivering the advice will lose money on the transaction.
It is often said that most people are not willing to pay for advice. FTRC research has previously identified that this is not strictly true. A more accurate statement is that most people wouldn’t want or can’t even afford to pay what a traditional financial adviser would reasonably charge for their services. Our analysis has identified that there are around 10 million people in the UK willing to pay a regular amount for financial advice.
The challenge is delivering that advice at a price they are willing and able to pay. This is where advice automation has a huge role to play. It is a scientific fact that computers can carry out complex financial calculations far faster than humans. Conversely humans are far better at communicating than machines. Technology of the type Wealth Wizards have developed can play a powerful role in reducing the cost of advice for those who need it.
Importantly Royal London has acquired the whole business, buying out not only the 70 per cent they tell me was owned by LV= but also the Wealth Wizards management team. This means they will have complete control over the future direction of the business. It would be reasonable to expect certain services to be quietly wound down, for example the artificial intelligence driven DB pension transfer analysis system that was previewed at Finovate Europe in early 2018.
Royal London seems keen to stress to advisers that this move will not see them entering the advice market themselves. Consequently, I could see the service evolving so it only delivers guidance to scheme members and signpost them to advisers who might use a white label version of the system. I see a better route where it could be used to support some members, but this will necessitate navigating a very fine line to keep advisers happy. There are several other actions that could be taken to reinforce the independence of the system.
Wealth Wizards being snapped up by Royal London leaves the rest of the workplace pension provider community very short of alternative options. The only other system that has been fully demonstrated to me to be capable of matching or exceeding the Wealth Wizards capabilities, is the Destination Retirement solution from Hub Financial Solutions which is currently being deployed by Mercer to power its automated at retirement advice service.
Indeed, The People’s Pension appear to be in a particular quandary given LV= currently deliver their retirement advice using the technology now owned by Royal London. How will that stand in the context of Royal London’s above assurances to advisers? Buying Wealth Wizards gives Royal London a way to significantly differentiate its workplace pension proposition. As such it is a very good deal for Royal London and may leave several other pension providers regretting a missed opportunity.