Robo-advice: Mind the gap

Without better labelling, are investors in danger of walking out of the financial advice gap and into a robo-advice trap?


In recent years, the UK IFA-driven advice model has changed. The “advice gap” is a phrase we hear often.

But, what does it mean?

Traditionally, a “gap” based on cost. Many fear that financial advice is inaccessible to investors because it is too expensive.

This is true. Even amongst wealthy investors (with over £50,000 investible assets), 43% told us that cost was the main barrier to seeking financial advice.


As the world changes, a less-publicised, but important gap is opening up.

Investors are losing out on crucial financial advice because it’s not designed to fit in with our modern lives.

Our research suggests 61 per cent of investors – that’s two thirds – avoid using traditional advisors because they don’t have the time to travel to their local IFA.

Increasingly we live more of our lives through the phones in our pocket and computer on our desk. This should be no different for accessing investment advice.

Investors need to be able to review, understand and manage their money immediately. Today, it is investors most likely port of call for financial information.


The so-called “robo-advice” market seems to offer a solution.

Still relatively nascent, “robo-advisors” in the UK now accounts for around £1bn AUM.

The market is growing. And, it is growing incredibly fast.

New technology is enabling more people to manage their money online and invest in their futures.

This has got to be a good thing.


But, there is a serious problem. Fundamentally, robo-advisors do not address the key question.

It is not technically “advice”. It does not meet the needs of those lost in the “advice gap”.

The majority of these new online investment managers do not provide regulated investment advice. What they do is deploy funds according to a risk category the investor self-selects into. This counts as financial guidance, but not as advice.

The importance of expert advice in guiding investment decisions cannot be understated. Advice is not an optional extra benefit, it is essential.

The Financial Advice Market Review (FAMR), published in 2016 by the FCA and HM Treasury, set out recommendations to foster an advice market with:


  • Good availability of affordable, high-quality advice and guidance
  • Greater innovation in the interests of consumers
  • A range of channels through which consumers can access advice and guidance
  • Consumers that are engaged with their own financial affairs and seeking out the advice and guidance they need.


Clearly, the possibilities afforded by “robo-advice” begin to address some of the above.

Technology enables new and innovative ideas. It offers us all the chance to start meeting challenges around financial advice and engaging the investors currently being left behind.

Much of what is currently labelled “robo-advice” is often no more than “robo-investing” based on generic risk profiling. In the long-run, this is not good enough.

We have the opportunity to affect lasting change on the way people invest their money. We can use technology to reduce the cost of advice and make it far easier to access.

As an industry, we have an obligation to provide clients with the advice that they are looking for.


Nick Middleton and Shane Williams are co-heads of UBS SmartWealth



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