Robo Adviser 2.0 or a genuine solution?

Since the wake of the 2008 financial crisis, the financial advice profession has wrestled with one persistent question: how do you make quality advice available to more people at a lower cost?

By the mid-2010s, robo-advice was widely seen as the answer to the advice gap, promising to deliver low-cost financial guidance to people who might otherwise struggle to access professional advice.

These online services use algorithms and automated processes to recommend and manage investments with little or no human involvement.

Clients answer questions about their goals, timescales and attitude to risk, before being matched with an investment portfolio that is managed on their behalf.

On paper, it looked like the perfect solution: a cheaper, scalable way to give more people access to professional investment guidance without needing large portfolios or paying traditional advice fees.

Yet despite significant investment and plenty of publicity, many UK robo-advisers failed to achieve the success that had been predicted.

Why did robo-advisers struggle?

The reality proved far more complicated, and for many robo-advisers the biggest challenge was not technology, but profitability.

While they attracted customers with smaller investment portfolios and improved access to investing, the revenue generated per client was often too low to support sustainable growth.

At the same time, customer acquisition costs remained high, as persuading people to trust an online platform with their life savings was more difficult than anticipated.

More importantly, consumers discovered that investment management is only one part of financial planning. People often need guidance on retirement, tax, estate planning, inheritance, pensions, protection, long-term care, cashflow planning and supporting family members. Digital automation could address some of these needs, but it often struggled to provide the wider context and judgement required.

Several high-profile UK robo-advisers, including Investec’s Click & Invest, UBS SmartWealth, Moola and Exo Investing, ultimately closed or withdrew. The lesson was not that technology had no value, but that many clients still want human advice, reassurance and professional judgement.

A new generation of low-cost advice

The latest attempt to address the advice gap has seen several major providers launching low-cost, hybrid advice services aimed at people who may not traditionally seek financial planning. Firms including Aviva, Interactive Investor, Standard Life, Octopus Money and Quilter are all developing propositions designed to make advice more accessible through a combination of technology and remote adviser access.

These are not pure robo-advice services as they incorporate telephone or video meetings with advisers, recognising that clients still want human interaction when making important financial decisions. Pricing structures are typically lower and simpler than traditional financial planning, with flat fees featuring prominently.

The question is whether this generation can succeed where previous attempts struggled. Serving clients with smaller portfolios typically generates lower revenue, while regulatory requirements, tech investment and customer acquisition costs remain significant. Many clients seeking help with retirement planning, inheritance tax, long-term care and other complex issues may require more time and expertise than a streamlined model can profitably deliver.

Several of the new propositions are also linked to a provider’s own platform or in-house funds. By retaining assets within their own ecosystem, firms can offset some of the commercial challenges, but this raises a broader question: Is the primary objective to find the most suitable solution for the client, or to create a commercially viable route into the provider’s own products?

The human advantage

That is not to say lower-cost advice cannot provide value and for many people, some guidance is undoubtedly better than none. However, it is important to understand the difference between investment guidance and genuinely comprehensive financial planning.

Many of the new propositions entering the market aim to reduce the cost of advice through technology, streamlined processes and remote adviser support. If these innovations help more people access professional guidance, that is a positive development. Yet, there remains a significant difference between helping someone choose an investment solution and helping them make informed decisions across every aspect of their financial life.

At Equilibrium, we believe financial planning is about much more than investments. Retirement planning, pensions, tax, inheritance, protection, long-term care, business interests and family objectives are all interconnected. Decisions made in one area can have consequences elsewhere, meaning that a narrow focus on investments alone can overlook valuable opportunities or create unintended risks.

That is why we created Equilibrium Essentials. It is designed to bridge the advice gap by making professional financial planning more accessible without sacrificing the personal relationship that sits at the heart of good advice. Every client works with a dedicated adviser who takes the time to understand their goals, circumstances and concerns. Rather than being directed through a standardised process or digital journey, clients receive advice tailored to their individual situation.

Importantly, Equilibrium Essentials is not simply a route into a provider’s own products or investment funds. It is built on the same planning-led philosophy that underpins our full financial planning service, ensuring clients receive advice that starts with their objectives, not a product solution. As clients’ needs evolve and become more complex, they can continue working with the same adviser and transition seamlessly into our full service without having to start again or rebuild trust with a new relationship.

Digital innovation has an important role to play as it can improve efficiency, reduce costs and enhance the client experience. Used well, it makes advice better, but we believe technology works best when it supports advisers rather than the adviser supporting technology.

The lesson from the rise and fall of robo-advice is that most people want more than an algorithm when making important financial decisions. They want expertise, context, reassurance and someone who understands what they are trying to achieve.

Innovation can make advice better. Great advisers make it meaningful.