Financial companies, large and small, are trying to grab a piece of the burgeoning digital advice market. Also known by the unattractive name ‘robo advice’, this uses computers to give low-cost financial advice online with little or no human intervention. It could help the huge numbers of people who need financial advice but do not currently receive it.
But digital advice has been strongly criticised recently for having confusing structures and opaque fees. Some also say many digital services are just a cynical attempt by companies to secure money on which they can charge ongoing fees, but are not sophisticated enough to make sure users get the best solution for their needs.
So is digital advice any good?
In the UK up to 5.5 million people need financial advice but do not get it, often because they think traditional advice is too expensive or they do not have time. Digital advice is already starting to fill this gap because it is quicker and easier and you can invest £1,000 or under – much less than human advisers usually need to make it worth their while.
This is why digital advice pioneer Nutmeg, for example, has accumulated 30,000 customers in its first six years, more than half of which are first-time investors.
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