Forget robo-advice. Robo-guidance is the answer.
The difficulty of separating out the difference between guidance and advice has caused much anguished discussion in the press ever since the idea of guidance was first mooted after the introduction of pension freedoms. True, advice is too expensive for those with smaller pension pots, but arguably their lack of money means that they are more in need of advice to make sure they don’t make mistakes with the little they have.
The problem then arises that guidance has to be differentiated from advice, otherwise Pension Wise, the body setup to provide guidance across the country, would be stepping on the toes of the financial adviser community, and also possibly risking being sued for giving guidance that the receiver thought was advice.
Indeed there lies the main difficulty. Is it possible to draw a demarcation line between the two, when the people who hear the same message can take it in different ways? Over the course of a long telephone call, in particular, it is very difficult for the one giving the guidance to make sure that the caller is not receiving the information as advice and acting on it as if it is a recommendation.
Attempts have been made to get round this by issuing scripts, but it is difficult to completely stay on track over the course of a long conversation on the phone with someone who by definition is not very au fait with the financial services sector and its terminology. The issue is that we can never be one hundred per cent sure that the message being imparted is identical to the one being received because of subtle nuances such as the differing use of language across the country and the different way people perceive other peoples tones.
And yet it is clear, and has been since the advent of RDR, that there is no way we can get advice to the price-point where it is affordable by everyone who needs it. The main option being offered to resolve this is the idea of ‘robo-advice’, i.e. automated advice given via intelligent apps.
The difficulty here is that apps are by definition not intelligent. They can’t read between the lines or get impressions of the level of understanding from the tone of replies. It is clear for it to be proper ‘advice’; it has to be given face-to-face.
However, there is one area where you don’t want people varying from the script – guidance. It is the guidance area where the effort should be put into automation, not the advice one. That would make it cheaper to make guidance available, and would obviate any danger of the guidance drifting into advice, as the system can only give the information it is programmed to give – nothing more, nothing less.
Automating guidance would reduce the cost to improve the standardisation of the service and ensure that there was a clear and constant differential between the guidance area and the advice area. This would benefit consumers and the IFA community alike.
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