The pensions industry must focus on technology and consumer engagement to keep up with changing demographics and work habits, but opinions are divided over whether robo-advice is the best solution.
For those unable to afford the cost of face-to-face financial advice, robo-advice, which provides algorithm-based digital financial advice with minimal human intervention, offers a lower-cost alternative, but the new technology comes with its own caveats.
The jury is still out on whether we truly believe we can offer the right advice through computers to people to make those important life decisions
Martyn Evans, Altus Consulting
Eighty-three per cent of consumers are concerned about cyber security, with 89 per cent of consumers saying it was important for them to recognise and trust the online brand, according to research conducted by Altus Consulting.
Martyn Evans, domain director – life and pensions at technology advisory Altus Consulting, said that “technology now is in the hands of the consumer, and they’re the ones that are setting the agenda”.
Attitudes towards technology are changing
Speaking at Aquila Heywood’s 2017 Pensions & Life Trends and Data Conference this week, Evans said the pensions industry needs to acknowledge and understand how attitudes towards technology are changing.
He also noted the changing attitudes towards retirement saving and how technology and advice can help. Nowadays, “there’s a credit obsession” rather than a savings culture, and he said this is “a really difficult thing when we’re trying to overcome the problems that we’ve got in the pensions industry”.
By 2020, many retirees will be asset-rich, cash-poor and “much more engaged digitally than they have been in the past”, Evans explained.
Robots cannot replace face-to-face advice
When it comes to advice, there has been quite a significant development in technology over the past few years but, ultimately, “there is no substitute for good, solid, face-to-face advice”, he said.
However, Evans noted that many people are not going to be able to afford this, resulting in robo-advice inevitably becoming a necessity. “Robo-advice will become the default for the mass market” and artificial intelligence “will have a large part to play in how that pans out in the next few years”, he said.
Source: Altus Consulting
Nevertheless, “the jury’s still out on whether we truly believe we can offer the right advice through computers to people to make those important life decisions”, he remarked.
Cost-effective solution
According to Evans, technology is the one thing that is going to help the industry operate more efficiently, by “allowing us to provide cost-effective advice”.
He added: “We need to understand and put the consumer at the very front of what we are doing.”
Mark Polson, founder of the Lang Cat, an independent platform and pensions consultancy, thinks the pensions industry is a long way away from obtaining convincing, decent financial robo-advice.
Polson said robo-advisers will find it “incredibly difficult to access customers” and “incredibly difficult to get people to care” because digital advice is not enough to “get people to do something different”.
Embrace simplicity
Polson blamed overcomplicated products and product structures for preventing people’s engagement in pensions.
“The question is whether digital engagement, whether robo-advice, whether these new channels will actually solve the problem. I don’t think they will,” he said.
According to Polson, simplicity is significant because the overly complicated nature of pensions limits engagement. If the industry wants to change, “we are going to have to embrace different ways of talking” and technology is going to have to move towards simplicity, he said.
A need for adaption
Phillip Walter, chief executive of platform provider Aquila Heywood, acknowledged that the industry needs a strategy to adapt to the changing marketplace.
The role of advice in a digital world
Long-term saving is one of the biggest issues facing society today. People are living longer and the pensions landscape seems to be constantly changing, which makes it very difficult to navigate and to know what options work best for individuals.
He said that although the life and pensions industry “is miles behind almost any other consumer-facing business” in terms of business intelligence and engagement sophistication, that could only lead to opportunities.
“Sophisticated responsive digital presence and tools and information” are crucial in terms of keeping up with the changing customer landscape, Walter noted.
He added that data analysis tools “help you guide automation, and that’s going to be really fundamental as we start to push further into robotics and pushing more control onto customers, which is what customers want”.
In terms of digital pension engagement, Walter said that if people “cannot engage their way, then they won’t engage at all”.
Ultimately, technology can support decision-making, and he noted the importance of targeted, personalised communications to suit people’s different pension journeys.
