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Over half of consumers reject robo-advice

Over half of consumers reject robo-advice

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By Sarah Kendell ·
June 15 2020

Over half of consumers reject robo-advice

More than half of consumers reject robo-advice due to technological illiteracy and distrust, according to a report from a UK regulator.

Over half of consumers reject robo-advice
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The UK’s Financial Conduct Authority surveyed 1800 people, assessing their financial literacy and risk appetite, as well as key personality traits and measures of trust in corporations, banks, and other people. Participants were presented with hypotheticals in which someone has been offered investment advice from a robo adviser, before being asked whether they would recommend accepting or rejecting the advice.

57 per cent of respondents rejected the advice.
“It was notable that varying factors across our treatments produced little variation in overall acceptance or rejection rates, including quality of advice,” the FCA said. “Poor robo advice, where the advice was a mismatch to the stated objective and risk appetite, was rejected in 58% of cases.”

“Higher quality robo-advice that closely matched the stated aim and risk appetite of the hypothetical investor was rejected in 56% of cases.”

While younger people were more likely to accept robo-advice, and people over 55 were more likely to reject it, the survey found a “hard-core” group comprising 30 per cent of respondents who rejected robo-advice altogether.

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That group was primarily older males who were less financially literate.

“Older consumers may be facing some of the most important financial choices of their life – how to use their pension freedoms, whether to opt out of certain pension schemes, consolidate pension pots and perhaps plan for possible social care,” the FCA said. “They also have the smallest opportunity for correcting any poor judgements.”

10 per cent of respondents tended to accept robo-advice in almost all situations, regardless of the hypothesised quality of the advice.

“There is clearly huge potential for robo-advice to become a major part of the financial landscape, offering great advantages in cost and convenience for many consumers, liberating us from much of the hard work of tough decisions and potentially saving us from cognitive biases and limitations that may lead us astray in complex scenarios,” the FCA said.

“What is less clear is whether it can solve the advice gap in the foreseeable future and whether ultimately those who may need decision support most will have faith in the algorithms of the future.”

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