Virtual financial advice a reality

A number of banks and wealth managers are operating via digital tools

The internet and new digital tools are transforming the provision of financial advice in the same way online stores revolutionised music sales and replaced local record shops on high streets.

A number of banks and wealth managers, including Vanguard, Charles Schwab, UBS and Nordea, are providing financial advice services from central hubs where groups of advisers communicate with clients via telephone, video conferencing and digital tools.

This virtual advice market can be seen as the industry’s response to the rapid growth of low-cost “robo-advisers” that offer automated services but no contact with a human adviser.

It could generate $66 billion (Dh242 billion) a year in revenue and will play a critical role in serving and attracting clients for providers of financial services, according to McKinsey, the consultancy.

“The new ‘virtual advice’ model retains the high level of personal service most consumers value from their financial adviser while leveraging the power of digital communication to deliver advice services from a distance,” says Daniel Gourvitch, a principal at McKinsey in New York. Virtual advice hubs promise significant productivity gains for banks and wealth managers. Advisers can work with more clients and conduct many more meeting in locations where administration and operational tasks can be centralised.

ETrade, the US retail broker, was one of the early movers into virtual advice, rolling out its Online Portfolio Advisor service in 2009. It is backed by 300 advisers spread across 30 branches and two national hubs.

“Clients like digital tools that can work end to end across the investment process, but many still want to talk to a human adviser,” says Lena Haas, senior vice-president of retirement, investing and savings.