An Aviva executive has backed the rise of robo-advisers and called for a shake-up of financial advice to help open up the industry to the mass market.
Andy Briggs, chief executive of Aviva UK Insurance, said the current regime is freezing out large swathes of the population because only the upper echelons can afford the hefty fees.
He said costs would fall if firms could offer more targeted support without being forced to carry out an in-depth review of a person’s financial affairs – a process which demands a full fee and the expertise of a qualified adviser.
Mr Briggs said robo-advisers could also be more powerful and beneficial to customers if the artificial intelligence did not have to carry out full financial assessments.
Speaking to the Press Association, he said Aviva was a “big supporter of pension freedoms”, but questioned whether it was right to give people a broader range of options without the support of advice and guidance.
He added: “We were supporters of the Retail Distribution Review, but one of the consequences is that advice is fee-based and highly professionalised.
“Ultimately it’s only the high-net worths that are prepared to pay those fees and therefore mass market generally aren’t.
“Therefore people are making these decisions without advice and guidance to support them.
“The challenge in the UK regime is that as soon as you step over that line into advice – if you are asking about your small pension pot, for example – then you have to move into full-fat advice, where you have to do a very holistic review of all that person’s financial affairs and give the full advice, with the full fee and cost, and with the fully qualified adviser to do it.”
Aviva announced in October that it had invested in automated robo-advice by agreeing to snap up a majority stake in Wealthify.
The Cardiff-based firm is a low-cost automated service which aims to make investing affordable and accessible, allowing customers to invest with as little as a pound.
Group chief executive Mark Wilson has been eyeing acquisitions in artificial intelligence and big data as he attempts to transform Aviva into a fintech firm.
Mr Briggs said Aviva was working “closely and constructively” with the Financial Conduct Authority (FCA) about how to offer better financial guidance and support.
He added: “The other area that merits some exploration is ‘could you have advice that is just focused on a subset?’ Advice that is just on someone’s pension pot without trying to take into account other assets they have elsewhere.
“At the moment you can be holistic or nothing and there is a big gap in the middle.”
Aviva upgraded its earnings, cash and dividend targets in November following what it called a transformation of its financial and strategic position.
The group said that it is now targeting higher than 5% annual earnings growth from 2019, as well as bumping up its dividend payout ratio target to between 55% and 60% by 2020.