RBS to launch robo-advice under NatWest brand

LONDON: Royal Bank of Scotland is launching robo-advice for more than 5m customers as banks return to the investment market after a string of fines and as regulators attempt to plug the UK's wide "advice gap".

The state-backed lender is claiming to be the first in the UK to launch automated online investment advice when it opens on Monday under its NatWest brand. The service is designed for the majority of customers and for people with as little as £500 to invest as a lump sum. The process, which costs £10 plus fees for the investment, is aimed at customers who lack the confidence to invest alone but do not wish to pay higher charges for full-blown financial advice, such as tax and inheritance planning.

The launch comes as other banks prepare to unveil similar robo-advice services as a way to offer investment products to more customers and increase their revenue at a time when low interest rates are weighing on profit margins. The move will also help address concerns that people in the UK are not saving enough money, in part because of a lack of understanding about financial services. A report by the Financial Services Authority found that one-in-five people cannot read a bank statement and that one in three cannot work out what the interest on their savings should be.

Banks retreated from the investment advice sector following regulation called the retail distribution review, which came into force in 2012. The rules were designed to help clarify the charges between product sales and advice, but were costly for banks to implement.

All of the large banks have been hit with fines in relation to giving poor advice or mis-selling complicated investments such as structured products. Banks retreated from the sector following 2012, partly because of the lack of regulatory clarity of what constitutes advice.

The FCA moved to plug the advice gap last year by clarifying its definition of advice. Phil Northey, a managing director at NatWest, said the FCA's clarification has helped with the launch of the service. He said: "The retail distribution review certainly increased costs and reduced access to advice."