FCA approval for AI adviser opens door for small-time investors

Multiply described as the second wave of innovation after ready-made investment portfolios


The Financial Conduct Authority has approved the first artificial intelligence app offering consumers regulated, automated advice, therefore opening up financial planning to investors with pots less than £100,000.

Multiply said a press release that it sought to reduce the UK’s advice gap, where 16 million people are priced out of financial advice.

It will launch its service to the mass market in Summer 2019.

To achieve FCA approval, Multiply’s technology had to undergo testing over 18 months which found that the technology is advanced enough to make complicated calculations of an individual’s situation and deliver suitable recommendations tailored to that person.

Vivek Madlani, co-founder and CEO of Multiply, said: “We’re immensely proud to be the first company to receive FCA approval to automate the full advice process. At the moment the industry is going backward, the advice gap is widening.”

Next wave of innovation in robo advice

“Pensions and investments remain a baffling, intimidating unknown for most people, and financial advice is largely the domain of those with more than £100,000 to manage,” said Boring Money CEO Holly Mackay, who was quoted in the press release. “There is a huge need for tech-enabled services which effectively tell people what to do.

“The first wave of innovation put ready-made investment portfolios online, simplifying the process and making things better. But the bigger problem is not a product problem, it’s an advice problem. And anything which simplifies this and makes it more affordable and accessible to more people is a great step forward.”

Converting ‘interested’ to ‘purchasers’

Altus Consulting director of wealth, Simon Bussy, said as a new provider, Multiply could find it challenging to create a brand as it takes time and money to build, and distribution could also be difficult as it tries to attract the mass market.

Cost and whether individuals want advice or guidance will be challenging factors as well, Bussy said. “The conversion rate from ‘interested’ to ‘purchaser’ will need to be significant and the fee income generated from the third party must be higher than the acquisition cost.

He added: “Some consumers will want a quick ‘guided’ journey, while others will require personalised advice and potentially will want to talk to an adviser, even if it’s just to validate or reassure.”

Crowded marketplace

Multiply said it is the only app that automatically explores your whole financial life across a wide range of products from pensions and investments to savings and insurance.

Once an individual has shared their goals and financial situation, the app will tell you which type of product and which specific providers/products work best for your needs, as well as exactly how much you should be putting into each product. Its advice aims to help customers create a financial plan in just 15 minutes.

Bussy said: “In an extremely competitive marketplace, this development raises the bar, and moves the story on from the ‘linear-journey-into-an-in-house-portfolio’ investment proposition favoured by some digital wealth services to something broader, just as Pefin has in the United States.

“Multiply’s aim is to enable their users to create a basic financial plan including emergency funds, medium term goals planning, and longer term retirement planning, each of which will refer the customer to a third party solution (from which Multiply will derive a fee or commission, depending on the product purchased).”

‘No human bias’ like IFAs

The provider said its automated advice means an individual’s financial situation is reviewed every time there is a life change or a new financial product comes out, compared to the yearly approach as it is with traditional independent financial advisers.

Making further comparisons with an IFA, Multiply said its advice is impartial and uses algorithms which have no human bias and are not hardwired to mis-sell.

Madlani said: “We want to put the power of a personal financial advisor in everyone’s pocket to help Brits access the advice they need to do the stuff that really matters to them – buying a home, saving for retirement, starting a family.

“It is extremely encouraging to see the FCA advice unit actively supporting ideas like ours. Their commitment to bringing innovative firms to market that will benefit consumers will see big societal issues like the advice gap tackled, and hopefully solved, sooner rather than later.”

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