People in Yorkshire are the least likely to use online automated financial advice services for their personal finances, according to new research by Deloitte.
Only 21% of people in the region would be prepared to pay to use ‘robo-advice’ services for simple financial planning advice in areas including investments, mortgages, pensions and insurance. Over 30% of people nationally said they would be happy to pay for the same services.
Deloitte’s research also shows over half (51%) of people earning £45,000 to £70,000 would use a robo-adviser for investments, compared with just 30% of those on incomes under £15,000.
The main reasons people in Yorkshire stated for not using the new technology was not being willing to pay for online personalised help (36%), not trusting a website (30%) and finding it easier to talk to an adviser than using a website (28%).
When it came to finding a mortgage only 27% of people in Yorkshire would use robo-advice against a national average of 38%. With pension contributions of £80 per week only 29% would take online automated personalised advice and with investments of £11,000 only 30% would take the advice against an average of 40%.
Sue Holmes, financial services partner at Deloitte in Yorkshire, said: “There is a significant financial advice gap in the market, where consumers have a need for advice but either can't or won't access it. Robo-advisers are low-cost and will increasingly be seen as a good alternative to face-to-face advice, especially where consumers have less complex needs.
“The need for affordable advice is growing as individuals are increasingly being tasked with managing their own pension pots and, in the context of a relatively low state pension, automated advice can play a key role in generating low-cost options to help. Our research suggests that robo-advice shouldn’t be exclusively aimed at those on lower incomes or that have smaller savings.”
Deloitte’s research shows a significant potential for robo-advice to take off, with 15 million consumers willing to pay for an automated financial advice solution, confirming that in six key financial advice markets over a third of consumers would be willing to pay.
Demand is highest amongst millennials, but the research suggests other age brackets could be interested in using robo-advice. Over two-fifths (43%) of 35-44 year old workers with a pension would use robo-advice on pensions, as would one-quarter (24%) for the 45-54 year olds and a fifth (21%) of those aged 55 and above. Also, 35% of defined contribution pension holders – more than three million people – would be willing to pay for robo-advice to invest their pension pots, with demand highest (45%) among those with the smallest pensions pots, many of whom cannot afford traditional advice.
However, Deloitte’s research identifies some key barriers in consumers’ willingness to use robo-advisers.
Holmes continued: "Whilst robo-advice can help close the financial advice gap, financial literacy and trust also have to be increased significantly. The industry needs to communicate the benefits of robo-advice in a simple and engaging way, for example, how robo-advice works in a safe and secure manner, the lower costs and convenience of 24/7 availability. Only then will people become as comfortable with disclosing their financial information to a ‘machine’ as a human.
“To-date robo-advice has focussed on investments, but its potential extends far beyond and the future looks bright as affordable and convenient automated advice users embrace its potential. In five to 10 years, we will probably not use the term ‘robo-advice’ as digital becomes the recognised channel.”