So far the industry has not seen much, if any evidence that lenders are disrupting the advisory market with game-changing technology.
But last year Robert Sinclair, chief executive of the Association of Mortgage Intermediaries, warned that mortgage lenders were gearing up for an ‘attack’ on the intermediary market through developments in technology. With Sinclair predicting that this technology is likely to hit the market in the region of 18 months to two years, it appears brokers have limited time to get themselves on an even footing.
Edwin van Bommel, chief cognitive officer at artificial intelligence (AI) company IPSoft, says that evidence of AI in the mortgage industry is currently limited to the initial stage of an application.
“I know that many banks are thinking about it and talking about it [artificial intelligence],” he says.
“There are some examples in the UK where lenders are offering an approval in principle online in 15 minutes or so. Obviously there’s a real-time risk assessment built into that and it doesn’t advise you on the final deal but looks more at the initial assessment.
“AI will enable the affordability assessment of the mortgage transaction to become even more data driven and also more real-time than it currently is,” Van Bommel adds.
Within wealth management, the use of robo-advice is already evident with a number of firms having invested in computer models which can manage customers’ asset portfolios. A key benefit to using robo-advice, which is cheaper than the human alternative, is being able to offer a lower fee. This allows access to financial advice for consumers who might not otherwise be able to afford it.
However, as online investment management firm Nutmeg explains, there are still limitations to robo-advice in the finance planning space. It recommends that more complex requirements such as tax or estate planning are currently best left to a personal financial adviser.
Van Bommel predicts that the use of artificial intelligence in the mortgage market is more likely to focus on educating customers, rather than adopting a model such as robo-advice.
“I think the educational part is much more important. Very few people go through the mortgage process enough times to be an expert. So the digital focus is likely to be much more focused on getting advice on what different types of products mean and the commitments borrowers will need to make, rather than a specific product.”
AMI’s Robert Sinclair agrees that this is likely to be the next logical step for the use of artificial intelligence in mortgage advice. He says that the industry’s failure to demonstrate any real technological process in the last decade is lamentable.
“I think there’s a lot to be said for how much information brokers can get from the customer before they meet them which can then be validated in the face-to-face meeting, as opposed to gathering an awful lot of the information in one go,” he says.
He adds: “Considering the amount of information that’s available now electronically on individuals, we’ve just not moved forward at all in gathering any of that to facilitate the advice process.”
A threat to advisers?
But Van Bommel warns that such developments in the mortgage advice space could be limited to the larger brokerage, with these firms having access to more finance to invest.
“While I believe artificial intelligence poses somewhat of a threat to brokers, I think it’s more of a threat for smaller to mid-size brokerages that cannot afford to make these investments,” he explains.
Sinclair is more optimistic. He says that while it’s likely the larger firms will be the first to harness developments in technology, commoditised products that can be purchased ‘off the shelf’ by brokerages could also follow.
“I always think that firms may not be able to afford to build these things themselves, but companies who build this technology will want to white label it and then sell it out to a wider market. Mortgage networks may also take an interest in this sort of thing, particularly networks who have got investment as well as mortgage members, as we’re likely to see this development drive through to the investment market first because of the platforms that are already available.”
But is there a danger that by embracing such change, the industry could see customers become ever more financially self-sufficient, posing the risk of losing the customers that it is trying to hold onto?
Sinclair concludes: “If we can engage more consumers and in a more cost effective way then that’s probably good.
“I don’t tend to get too hung up about good or bad or right or wrong, it’s about how we embrace this to engage more people to end up with the right outcomes. Some people will do that using technology, some will do that using people. Sticking your head in the sand and ignoring it probably isn’t the answer.”