Royal Bank of Scotland leverages FCA-approved digital advice in the UK

By Anthony Stich | 24 March 2016

Recently, Royal Bank of Scotland eliminated 220 advisors with the plans to replace them with ‘automated advice.’ To drive down costs for customers while maintaining service levels, this advice strategy makes sense. In fact, RBS firmly believes that this is exactly what its customers want. From The Stack:

Given the green light from UK regulator, the Financial Conduct Authority (FCA) this week, the bank agreed that the move would lead to cheaper, more accessible financial advice.
‘Our customers increasingly want to bank with us using digital technology. As a result, we are scaling back our face-to-face advisers and significantly investing in an online investing platform that enables us to help a new group of customers with as little as £500 to invest,’ RBS said in an official statement.

It is important to note that RBS did not do this without a great deal of consideration, both internally and by the Financial Conduct Authority (FCA). Over the last few years, many financial institutions left the advice space in the UK market because the costs were too high, the liabilities were too great, and robo-advice was not an alternative.

In fact, just as recently as December 2015, robo-advice in the UK was considered controversial, and in some cases, irresponsible. Now with the recent report from the FCA regarding financial advice and acceptable ways to drive down costs (to the benefit of the consumer), digital advice in the UK is expected to develop at a rapid pace.

Look to the United States for guidance

It is true that financial institutions in the United States look to the United Kingdom for legislation they can anticipate in the future. If one looks back over the last few decades, most governmental regulations regarding overarching consumer finance in the United States stems from UK legislation. Take, for instance, the most recent example between the upcoming (and already infamous) “DOL Ruling” and The Retail Distribution Review (RDR) – the correlation is stunningly clear. A great deal of speculation is happening now as the United States anticipates the impact this DOL Ruling has; some analysts are simply telling everyone to look at the impact Retail Distribution Review had in the United Kingdom. Only time will tell.

Now it can be argued that the reverse can be applied when considering technological advancements such as robo-advisors. Oftentimes technology trends start in the United States and once they are deemed viable, the trend is quickly implemented in the United Kingdom. Just a few weeks back, my colleague Jean-Francois wrote:

As with so many trends, robo-advice comes to us from the other side of the Atlantic Ocean. In the US they mainly use robo-advice for asset allocation; software calculates the ideal investment categories and even in some cases your entire portfolio on the basis of your investment profile and investment preferences. The robo-advisor looks through time, all the way through to your pension, for example, and helps you optimise your investments. From a cost perspective this is ideal of course, work that used to be done by a human advisor at a charge of around 2 to 4 per cent per year is now done by an online platform at a fraction of the cost. A charge of half a per cent or less is already fairly normal.

So, you can take advice from your lads across the pond. Robo-advice is here to stay and with RBS ‘breaking the ice,’ the United Kingdom should expect a flurry of robo-advice activity both from internal institutions and outside forces. With all that said, if your firm is not prepared with a digital distribution strategy, catching up is urgent.

Digital advice in the UK – a discussion

With this anticipated influx of digital advice entering the UK market, are financial institutions adequately prepared? Do emerging competitors, global institutions, and banks such as RBS have a jump on local advice providers? Firms of all sizes across the UK now have a whole new type of competition with which to contend, while also learning how to implement new technology into their planning process in order to remain competitive. UK advisors must learn about digital advice and its viability—especially as it pertains to Pension Freedom—to ensure they are keeping up with client expectations which are undoubtedly changing with the introduction of robo-advice to the market.

Advicent is hosting an Innovation Summit in London on April 7th, and topics such as robo-advice will be discussed thoroughly. In fact, we will likely discuss how an accessible tool, like our product Narrator, can be the conduit that your firm needs to compete with traditional institutions like RBS, and now, emerging competitors too.

Read the Financial Advice Market Review final report here.

By Anthony Stich, Director of Global Marketing, Advicent.


Read more articles from Advicent below:

Human advisor and robo-advisors side by side? by Jean-Francois Rodrigues, Strategy Consultant, Advicent Solutions.

Balancing financial robo-technology and personal touch by Tom Burmeister, Vice President, Enterprise Accounts. Advicent Solutions, 



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