This time last year I, along with many others I suspect, thought that technology would be of the major battlegrounds on which the mortgage market would be fought throughout 2018.
It certainly kicked off that way – the words ‘robo advice’ were hard to ignore as the industry seemed to continuously debate amongst itself when (not if) the ‘march of the robots’ would ultimately supersede human advisers. Many robo adviser businesses appeared willing to die on the altar of their own platforms suggesting this was not only the future, but the here and now and those who did not ‘get with the programme’ would soon be left behind.
The first quarter of 2018 was definitely marked by a proliferation of new ‘robo advice’ entrants and the size of their marketing budgets meant they made a lot of noise. But that noise became less and less as the year progressed as the reality of the UK mortgage market, its complexity, and the demand from borrowers to speak to a human being, became increasingly clear.
Indeed, there were soon rumours circulating out from those very same ‘robo advisers’ suggesting they were having to quickly move towards hybrid models in order to increase activity levels. That is, while many mortgage borrowers were willing to start their advice journey online or via a ‘robo’ proposition, actually going through the whole process in this way was not particularly appealing for many. Indeed, as has been predicted, there is an innate want and need to jump off the ‘robo advice’ wheel along the way to speak to an adviser, and to ensure they are getting the right deal.
Plus, of course, we (as mentioned above) have the added complexity of most people’s circumstances and the impact this has on their ability to afford a mortgage and the mortgage they’re able to secure. While many of the robo advice propositions are very good at, what we might call, the run of the mill mainstream/vanilla advice options for borrowers, large numbers no longer fit this approach.
Add in multiple income streams or self-employment or regular bonus payments and you already moving away from ‘vanilla’; add in unconventional properties and you move away again; add in a holiday home or a second property, or a number of buy-to-lets in the background, and you move again. The reality of most people’s circumstances make it difficult for a ‘robo adviser’ to go through half of the process, let alone all of it with this type of borrower. It is perhaps therefore no wonder that those who initially suggested it was ‘robo advice’ or bust, quickly realised that they needed a hybrid element in order to survive.
Which of course is not to denounce the whole ‘robo advice’ concept – we’re all for advisers utilising such propositions in order to proved a further avenue for clients (old and new) to make initial contact and start that journey. However, there also has to be an element of reality here – as an adviser, could you seriously look at your existing client bank and believe that all of them would want to use just one process route into and through your services? I doubt it. Each of those clients may have come to you in a slightly different way and it’s important that not only do you keep those routes open, but you add other methods in order to bring in that new customer base.
As mentioned, ‘robo advice’ as the defining debate in the mortgage market fizzled out about half-way through 2018. The FCA’s Interim Report resurrected it slightly and, if we’re led to believe the rumour mill, it may be resurrected by this quarter’s Final Report – the regulator it would seem is very keen on creating a mortgage advice environment in which the ‘robo advisers’ can thrive. Whether that shows a true understanding of the industry, or the wants and needs of borrowers, is another thing entirely. Indeed, I would be very worried about a regulator fabricating a landscape – driven purely by the thought that it’s ‘technology or bust’ when it comes to mortgage advice.
I’m a great believer in technology as an enabler for advisers – to support firms’ activities, to add new strings to the advice bow, and to help cut down on admin/time/cost, etc. I’m not so sure we should be forcing firms to utilise robo propositions if they do not wish to, or creating a regulatory structure which gives undue advantages to the tech propositions. As always, it will be the market, i.e. clients, who decide which firms they want to use and how they want to access advice, not the regulator. Those who can embrace both technology and the traditional are likely to be the winners and in that sense 2019 will be no different to other recent years.Tim Merrey is Head of Software Development at Stonebridge Group