What is the cost of ongoing financial advice in the UK and why should we care about it?
Financial advice firms are charging ongoing fees while failing to demonstrate the value they’re providing, or more worryingly, even evidence that they’re providing the service at all.

Despite collecting substantial annual charges, many wealth managers aren’t delivering the continuous, proactive support clients are paying for. As regulatory scrutiny increases and the advice gap remains contentious, consumers are rightfully questioning: What are we actually getting for these ongoing financial advice costs?

The average cost of ongoing financial advice in the UK
The Financial Conduct Authority’s (FCA) investigation into ongoing advice charges has revealed significant issues across the board. From widespread issues with ongoing advice fees across multiple firms to an estimated hundreds of millions in fees charged without proper service delivery. This raises the critical questions for firms: how can they effectively demonstrate proof of value to their clients and the regulator?

One way to tackle this challenge is by using AI to take care of time-consuming admin tasks. With less time spent on manual processes, advisers can focus more on what really matters—delivering personalised, high-value advice that genuinely benefits clients. To see the difference AI can make, let’s look at a comparison of costs for a £200,000 client, using traditional advice models versus AI-powered solutions. This will show how AI can not only make things more efficient but also help firms offer advice that’s more meaningful and impactful.

Is it easy to spot potential areas for automation and scaling that will save clients money and advisers time?

Traditional model vs AI model

We can see that the traditional advice model might look something like this:

• Annual Review Meeting: £600
• Suitability Report: £400
• Research & Analysis: £300
• Administration: £200
• Compliance Checks: £200
• Ongoing Monitoring: £200

Total: £1,900

This cost structure not only puts pressure on firms to deliver value but also creates barriers for potential clients with more modest portfolios.

However, when we embed AI into this model, we can see that the same services could potentially be delivered at half the cost:

• Annual Review Meeting: £300 (utilising video conferencing and automated scheduling)
• Suitability Report: £200 (AI-assisted report generation)
• Research & Analysis: £150 (automated data gathering and initial analysis)
• Administration: £100 (automated client communication and document processing)
• Compliance Checks: £100 (AI-powered compliance monitoring)
• Ongoing Monitoring: £100 (automated portfolio monitoring and alerts)

Total: £950

This 50% reduction is more than just a boon for existing clients; it opens up possibilities for serving a broader range of clients, bridging the advice gap that has long plagued the industry.

The ramifications of a lack of value in ongoing advice
After being audited by the FCA, firms such as St James’s Place (SJP) had to set aside £426m for potential ongoing advice refunds to compensate customers who did not receive the advice they should have due to inadequate record-keeping practices. And this case was just the beginning when it came to concerns within the industry about historical record-keeping practices and the ability to evidence that proper advice was given.

If firms can’t provide evidence that conversations around ongoing advice fees took place–and that clients understood the advice–it becomes difficult to prove that the advice was actually delivered.

Scaling up, reaching out
There’s a number of ways that generative AI tools can help financial advisers be more effective and transparent when it comes to supporting their clients. By cutting away at time spent on time-consuming, low-value administrative tasks, they can provide a more accessible service. 

• Automated client onboarding: AI can streamline the initial fact-finding meetings and processes, reducing the time (and money!) spent gathering client information. This can allow advisers to take on a more varied range and number of clients without compromising on service quality.
• Intelligent portfolio management and enhanced data analysis: AI-powered tools can continuously monitor client portfolios, by processing vast amounts of market and client data. This gives advisers actionable insights to inform their recommendations and allows them to offer proactive service delivery at scale, all whilst ensuring clients receive timely advice.
• Automated and personalised communication: AI, particularly through natural language processing (NLP), can help create tailored communications and reports for clients. With regular contact being a key concern flagged in the FCA’s investigation, this tech ensures advisers can maintain consistent, meaningful communication without feeling overwhelmed.
• Risk assessment and compliance: AI can assist with ongoing risk profiling and suitability assessments. This can ensure compliance with regulatory requirements, such as the FCA’s Consumer Duty, so that advisers can focus on the high-value and high-priority interactions with their clients.
• Service on a scale: By automating routine tasks, firms can offer tiered service levels. This potentially provides lower-cost options for clients with simpler needs. This could further aid in closing the advice gap, making ongoing financial advice more accessible.
• Virtual assistants: AI-powered chatbots or virtual assistants can handle basic client queries, freeing up advisers so that they can focus on more complex issues. This not only improves client service but also allows firms to manage a larger client base effectively.

The push and pull of implementing AI
One of the most promising aspects of integrating generative AI into ongoing financial advice services is that it can significantly enhance their value by offering tailored, data-driven insights in near real-time. But the real challenge comes down to the implementation of AI itself. Though it can be as simple as clicking a few buttons, integrating AI platforms and training staff to utilise them is a completely different kettle of fish. 

It wouldn’t be unrealistic to expect a little resistance from both client and adviser. We already know that whilst 72% of advisers would be open to bringing AI assistance to their workday, almost all of them feel unprepared to do so. 

Firms will have to ensure they invest not only in the technology, but in their people. This is the only way to benefit fully from platforms that are built, not to replace humans, but to enhance the service they provide.

It’s also worth noting that the use of AI in financial services raises important questions about data privacy, algorithmic bias, and the need for human oversight.

Regulatory bodies like the FCA will need to adapt their frameworks to account for AI-driven advice models, ensuring that the use of technology doesn’t compromise client protection or the quality of advice.

So, what does this mean for ongoing financial advice fees?
As the financial advice industry faces increased scrutiny and the need for more efficient service delivery, AI presents a compelling solution. This technology allows the adviser to automatically record meetings, which provides an auditable trail of what was said, how the ongoing advice fees were explained and sold, and the customer’s understanding of the value of ongoing  advice services.

If the FCA come knocking, this means you’ll have data-backed evidence to prove what you’ve discussed. It also proves what ongoing advice was given to the client, and that its value has been properly articulated. 

AI can be used to assess the trends in sentiment towards ongoing advice, how your clients feel about it, and whether they truly believe they’re seeing value for their money. With this transparency, firms can investigate tiered or modified pricing structures to ensure their clients are getting the most bang for their buck.

More than helping firms meet regulatory requirements more efficiently, AI can help make financial advice more accessible and affordable for a broader range of consumers, bringing new clients into the support of ongoing advice.

The recent FCA investigation serves as a wake-up call for the industry. As firms look to enhance their service delivery and ensure compliance, embracing AI could be the key to not just surviving but thriving in this new regulatory landscape. By leveraging these technologies, the financial advice sector can build a more robust, efficient, and inclusive model of service delivery, ultimately benefiting both advisers and clients alike.

Read the original article here.