'Robo-advice' approved by FCA but axes 220 jobs at RBS

Robo-advice is cheaper than face-to-face guidance

So-called "robo-advice" has resulted in hundreds of job cuts at Royal Bank of Scotland (RBS), just as the regulator gave its blessing to the technology.

RBS is cutting the jobs of 220 face-to-face advisers, as it switches customers to an automated online service.

It said personalised advice would now only be offered to customers with more than £250,000 to invest.

However, the Financial Conduct Authority (FCA) said such services could make financial advice cheaper.

A Natwest and RBS spokesperson said in a statement: "Our customers increasingly want to bank with us using digital technology. As a result, we are scaling back our face-to-face advisers and significantly investing in an online investing platform that enables us to help a new group of customers with as little as £500 to invest."

RBS is cutting a further 200 jobs in insurance products.

Advice services

After a seven-month study, the FCA and the Treasury's joint Financial Advice Market Review concluded that the new technology could "play a major role in driving down costs".

The FCA said it should also set up a new advice unit to help financial firms set up the automated programmes - known as robo-advice.

Such programmes allow consumers to go online, answer some questions, and receive financial help without having to pay for individually-tailored suggestions.

At least three more High Street banks are thought to be planning to launch such services.

Most banks scaled down their financial advice services in 2013, when a review by the previous regulator made it impractical for them to provide cost-effective help to most consumers.

What is Robo-advice?

Robo-advice consists of a series of online questions, such as:

• What are you saving for?

• How much have you got to invest?

• What is your attitude to risk?

• How long do you want to invest your money for?

The provider, such as a bank or wealth management company, will then suggest how you should invest your cash, and then help you to do so.

Pensions

The FCA said that many consumers did not want to pay for full regulated advice, but simply wanted more informal guidance.

It recommended several ways in which employers could be encouraged to give such guidance, with consumers able to pay for it over a period of time.

And it suggested that consumers be given "nudges" at certain times in their lives to prompt them to take action on their finances.

"The package of reforms we have laid out today will help increase both the accessibility and affordability of the advice and guidance, to ensure that consumers get the help they really need when they really need it," said Tracey McDermott, the FCA's acting chief executive.

The FCA also said the Treasury should consider allowing those nearing the age of 55 to access some of their pension pots to pay for financial advice.

And it recommended that the government should champion the idea of "pensions dashboards" - a means by which consumers can keep track of different pension plans they have paid into over the course of their working lives.