Pension providers are arguing that retirement savers do not need expensive advice from a human adviser and that a robot can weigh up financial decisions faster and without making mistakes.
Robo-advice is taking off fast in the USA, where firms are flocking to automate financial services – and now one leading UK pension provider is turning to artificial intelligence to save customers money.
The problem in Britain is anyone with a fund worth more than £30,000 has to take professional advice before cashing in their money under the new pension freedom rules.
IFAs are either turning away small-pot clients or charging around £150 an hour for advice – which often leads to a bill of between £1,000 and £3,000 stripping a large slice of cash from out of the pension pot.
LV= was the first UK pension provider to launch a robo-advice service – called Cora.
Calling on Cora
For £199, Cora provides the same report that an IFA offers at 10 times the price or more.
The report provides fully regulated advice online, including a risk profile, suitability check and product recommendation.
Cora uses complicated algorithms to draft a report according to the answers to fact find questions given online by savers.
In effect, the only difference between taking financial advice from a robot and a human for most people is the price, as advisers feed the information they collect from interviewing clients into similar software to produce their final report.
“Research showed that our customers had problems finding the regulated advice they needed to exercise their pension freedoms,” said Richard Rowney, the firm’s life and pensions managing director.
Robo-advice for the wealthy
“They told us that they felt advisers were not offering value for money for reports for pensions worth less than £50,000.”
The government and financial regulators are urging advice firms to make pension reviews cheaper, but with a market of around 5.5 million retirement savers forced into seeking a professional once-over of their spending plans, pension pots are fast becoming profitable honey pots.
Free advice is available from the government’s Pension Wise service.
Robo-advice is less suitable for high net worth clients, who need a more personal service to cover cross-border taxation and investments.
