Corporate robo advisers: Serving the underserved

95% of the population can’t justify expensive financial advice. We’re working to bridge the gap.

Over 50% of households have no savings or investments whatsoever, they carry basic income and debt. A further 45% have less than £200,000 of investable assets, making face-to-face financial advice at £150 per hour less than worthwhile. So that’s 95% of the population underserved by the financial services industry.

The solutions proposed to date for serving-the-underserved largely focus on ‘robo-advice’ or ‘workplace marketing’.

For robo-advice, there’s a question outstanding about how best we regulate it, and whether emerging models merely replicate the product sales models of by-gone times. Will fiduciary models emerge, where client best interests are always put first? Few understand the difference between efficient financial modelling that treat well-being as an externality, as opposed to sufficient financial modelling that optimise well-being for a given level of consumption. But, that’s a story for another article on the purpose of financial services.

The good thing about the workplace is at least you have some form of fiduciary looking out for the best interest of the customers, i.e., the employer.

So how well served is the workplace market?

Over 50% of employers are 1 or 2 employee firms, typically director-only, and either having no auto-enrolment duties or don’t need to put a workplace pension scheme in place. A further 45% are small businesses employing less than 30 workers. An independent survey from Leeds University Business School in October 2015 found that small business owners were looking to pay no more than £500 for advice, whereas advisers were looking to earn 10 times that amount. Welcome to the 95% corporate underserved market.

The way the corporate underserved market is served is through Robo-Corporate-Advisers. An example of this is my firm, Workplace Pensions Direct (WPD).

The Robo-Corporate-Advisers have made significant investment in technology based systems and call-centre support to cut the adviser time down from 20 to 40 hours per scheme (source: Standard Life) to just 90 minutes of conversation. The resulting solution is both affordable (starting from a daily rate of much less than £1) and scalable.

As a result, business advisers – whether they be accountants, payroll professionals, or financial advisers – from across the industry are outsourcing their auto enrolment back office administration to the Robo-AE firms, like WPD. The business adviser released from mundane, time-consuming, unprofitable administration tasks retains client relationship to service wealth needs of the directors and staff as normal. They are then able to command the type of revenues required annually to maintain earning levels.

Adviser firms with existing in-house AE solutions are turning to the Robo-AE firms to sub-contract administration and achieve greater effeciencies in their business models.

Workplace Pensions Direct (WPD) is a national ‘Robo-AE’ service, guaranteeing clients won’t be fined for a daily rate of less than £1. WPD services a network of over 500 business advisers nationally, providing access to peace of mind for over 10,000 of their business clients and ensuring access to best outcomes for over 100,000 workers.

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*Monthly fee initial 24 month contract: See Fees for details

Assumptions: 2016/2017 tax year – £26,500 average pay – 15% average staff turnover. Available ongoing cost savings are from salary exchange, earnings definition, postponement for new starters, employee charges, employee lost investment return, and employer charges.

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