M&G and Charles Stanley have both announced low-cost advice services to help bridge the advice gap.
M&G Wealth has appointed digital advice specialist Ignition Advice to develop a low-cost hybrid digital offering, while Charles Stanley has announced the creation of its Central Financial Services division which will offer “simplified advice” rather than full service discretionary management.
M&G’s hybrid robo-service is expected to be launched in the final quarter of 2021. It will be fronted by a human adviser but underpinned by digital technology, which it said will reduce the time and cost to deliver advice, and allow a better service for those with smaller sums of money.
Australian-based Ignition, which moved into the UK market this month, specialises in developing digital direct to customer advice solutions and experiences.
Targeting the root of the advice gap
M&G Wealth Advice deputy chief executive Richard Caldicott (pictured) said: “We want as many people as possible to access advice in an efficient, understandable, convenient, affordable and sustainable way.”
He added that there is a large population of investors “who would benefit greatly from financial advice but they perceive it to be inaccessible and too costly”. Caldicott said this problem is “at the root of the advice gap and something we are fully focused on addressing”.
Boring Money CEO Holly Mackay estimates digital advice could grow to 7 million customers of which around 4.4 million are DIY investors with low confidence, 1.9 million are new investors saving in cash, while 850,000 people currently see a traditional adviser as a migration risk.
Making financial advice ‘affordable for millions more people’
Altus consulting director Simon Bussy described the partnership as “particularly exciting” as it brings together “the big brand, resources and vision of M&G with a cutting-edge technology vendor”.
Bussy added: “Importantly, M&G absolutely recognise the important role that people and technology play when brands interact with their customers, and the evolution of the wider M&G Wealth proposition and distribution strategy is testament to this and their direction of travel.”
Financial Technology Research Centre founder Ian McKenna described the move as a win for M&G.
He said: “Complementing their existing traditional restricted advice team with a low-cost hybrid automated proposition is a great way to support hundreds of thousands of former potential customers who will be approaching retirement and need help but have a level of assets that will make full blown traditional advice uneconomic.”
McKenna expects a number of other organisations to go public with similar propositions before the end of the year. He added: “This is becoming a highly competitive sector and will make financial advice affordable for millions more people over the next couple of years.”
Clive Waller, managing director of CWC Research said: “The future is digital, hybrid and low cost”.
Between full discretionary management and execution-only
In Charles Stanley’s final results for the year ended 31 March, it announced the creation of its Central Financial Services division “to address client needs for simplified advice as opposed to full service discretionary management”.
The division will incorporate model portfolio services, foundation financial planning and execution-only services.
Charles Stanley CEO Paul Abberley said the service is designed for clients “for whom cost, technology and known outcomes take priority”.
He added: “We felt it important to help provide a simplified advice offering to those clients seeking a service between full discretionary investment management and execution-only.”
Charles Stanley reorganises divisions
The move comes on the back of a reorganisation of its front office divisions to reflect a new operating structure. The Central Financial Services division will run alongside the Investment Management Services and the Financial Planning Services divisions.
Charles Stanley chairman David Howard described the creation of the new division as another step forward in its transformation programme “to drive greater efficiencies and to develop new methods of engaging with and supporting existing and new clients, as the need for advice continues”.
Mackay said with only 9% of adults having a financial adviser, the emergence of lower-cost, lower-touch advice models is a “no-brainer”, while Waller said advice should be low cost as most needs are “absolutely straightforward”.
He added: “Gone are the days of people believing you have to pay lots for asset management.”
Charles Stanley AUM jumps but profit slides
Elsewhere, the wealth manager reported record levels of funds under management and administration at £25.6bn, up 27% from £20.2bn in 2020. It also saw record revenues for financial planning which were up 14.9% at £10m from £8.7m the year before.
However, it saw reported profit before tax slide from £17.3m in 2020 to £13.4m in 2021.
Abberley said profit was “inevitably impacted by market conditions but the results highlight the resilience of the business”, adding it was “a strong performance given the prevailing economic circumstances”.
