Freedom and choice has given us too many options for a computer to fully comprehend

Can robo-advice be used not just at the point of retirement, but also all the way through? Jonathan Watts-Lay, director of Wealth at Work thinks not.

Speaking at the National Association of Pension Funds’ annual conference, he argued that freedom and choice has made retirement decisions so complex that savers need an independent financial adviser who can see the whole picture to make the best decision.


”There is a real danger of mis-buying,” he explained. He also pointed to the complexities in the tax system that could see people overpaying without the benefit of advice. 

HMRC evidence definitely suggests people are paying tax, but are they paying too much?

One example he gave was compelling. He explained that while the tax free allowance is £10,600, it is perfectly possible to take a pension income of £20,000 without paying any tax. This is done by carefully calibrating the various pots of money using both taxable income and tax exempt income such as ISA savings.

”Robo-advice is imminent”

While a computer could do this calculation in theory, in practice it would need to have all the information on all the available streams of income. The problem, he said, is this will require people to go through lengthy, complicated online systems, something most will be unwilling or unable to do.

In Australia, the experience is similar. Schemes there also operate in a complex environment, exacerbated by freedom. But Chris Davies, the chief executive officer of Telstra Super, thinks that this complexity is acually pushing people towards robo-advice.

Their problem, he explained, is one of demand. His scheme employs 20 planners. Despite this, the advisers only reach 10-15% of the organisation. He would like it to be more, as the evidence suggests that those who see a planner get a better outcome, but they find it extremely difficult to recruit planners.

”The regulators want to make this happen”

The fact is that there are not enough financial planners in Australia and this, he said, has led to them automating more than they would have otherwise.

A shortage of IFAs is not a problem that is unique to Australia. In the UK there are certainly not enough regulated advisers to help everybody who could, in theory, benefit from advice.

The advice gap in the UK is widening and at a time when more people could do with the help than ever before.

This is perhaps one of the reasons why the FCA is pushing for innovative solutions. One of the core aims of the Financial Advice Markets Review is to ”improve the regulatory and legislative environment to make it easier for firms to innovate and provide affordable and accessible advice solutions for staff”. 

Indeed, Dr Eric Tyree, chief data scientist at Capita Employee Benefits thinks robo-advice is coming whether we like it or not. Speaking in an earlier session on big data he said: “Robo-advice is imminent. The technology exists, there are vendors and there is demand. The regulators want to make this happen.”

”So who goes to jail when they get it wrong?”

This echoes Davies’ Australian experience. He pointed to a report from Australian website Cufflink which showed that at least 41 different firms were currently working on robo-advice solutions. We would expect at least a few of them to succeed, he said.

But if robo-advice cannot deal with the complexity of the UK pensions system, should we be trying to stem the flow? Or is it already too late?

Complexity is not the only reason that people should be wary of turning to robo-advice to fill the advice gap. Accountability is another issue.

Davies highlighted some of his favourite responses to a survey in Australia, conducted by, which asked advisers for their opinions on robo-advice.

One response said: “So who goes to jail when they get it wrong?”. It’s a good question. We are not talking about robo-guidance, but robo-advice. An automated service that tells you not what you could do, but what you should do.

One of the benefits of regulated financial advice is that if someone gives you bad advice, there are recriminations. But how can you hold a system responsible? And what kind of punishment would you enact? 

These are questions that the FCA will need to answer, before it is too late.