Nick Goodway: Robots will never beat the best human financial advice

Chink in the armour: Robots can't respond to clients in the way a human adviser can

Laurent Guillieron/EPA

16 March 2016

Having read the Financial Markets Advice Review produced by The Treasury and Financial Conduct Authority this week my thoughts turned to what it would have been like if my own independent financial adviser had actually been a “robo-adviser”.

For, be in no doubt, if the current or even the proposed regime had been in place 30 years ago I would not have met him and I would not be reaping the rewards today.

Roger (I’ll call him that because it’s his name) is most certainly not a robot. A robot would not have cost me so many teabags over the years and almost certainly not have earned as much commission courtesy of me as Roger has.

The computer program hiding behind “robo-adviser” probably won’t appear on the front page of the Financial Times being publicly criticised by the City regulator the way Roger did in the very early days of financial regulation. “All a bit of a misunderstanding,” he naturally explained.

But, as the FMAR acknowledges, it is regulation which has killed off the likes of Roger and his equivalents at banks. Too much red tape and far more transparency about commissions have meant most of his contemporaries have chosen to retire. At the same time banks, hit, quite rightly, by large fines for mis-selling and damned, also correctly, for sales-driven pay for their staff, have withdrawn from most investment advice.

Genuine advice is now the preserve of those wealthy enough to pay for it or those whose liquid assets are large enough to produce enough in fees and commissions for firms to be interested.

That has left some 16 million people without any kind of advice even though they have savings and have recently been given much greater freedoms to do what they will with their pensions. I have no doubt that if the current systems 30 years ago had been in place I’d have fallen into that “advice gap.”

I am fortunate that instead I was introduced to Roger. Don’t get me wrong. He has not been my fairy godmother. We have disagreed plenty along the way. Some of the investments I was advised to buy may have earned him more commission than similar other ones. I have also made my own mistakes (Japanese equities in the Nineties). But I have also learned from those errors and understand risk better.

Roger knows more about me and my circumstances than any computer program ever could. He has watched me move house, lose and change jobs and seen my family grow up. His advice has not only changed with those circumstances but often anticipated some of the changes. No algorithm could do that.

"His advice has not only changed with those circumstances but often anticipated some of the changes. No algorithm could do that."

 <p>Nick Goodway</p>

But most importantly Roger bullied me. He would squeeze another £20 a month out of my disposable income about once a year to go into savings. The equivalent of a couple of pints and 20 cigarettes a week locked away for years. The result has been modest, welcome pots of savings which today I don’t need to spend and should boost my retirement income — not that I’m going to retire any time soon.

My point is that no “robo-adviser” can or will be allowed to bully me into saving. People can read all they like about how much they need to save to buy their first house or to enjoy a comfortable retirement but they cannot nowadays be cajoled or forced into saving.

We need a way to create more Rogers, not robots.

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Nick Goodway: Robots will never beat the best human financial advice

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