The digital version of a broker – ‘robo-advice’ – has been around for years now, and, as all technology does, has evolved and got smarter over the years.
Experts have long predicted that robo-advice will impact the mortgage market the way online shopping has impacted the retail sector, and brokers have been warned to embrace the technology or risk being left behind.
And don’t get me wrong, I am not an old dinosaur determined to pretend the online revolution isn’t happening, but digital demands vary, not only from customer to customer but also from sector to sector.
Not quite the same
While one person might be quite happy buying all their clothes online, booking hotels and doing online banking, there will be another that wants human interaction at every step – demanding a real-life shop assistant, a hotel receptionist, or their own bank manager.
But even the most digital savvy among us still prefer human interaction when it comes to a mortgage application. When a customer wants advice, getting it from a computer is not quite the same.
While getting a car insurance quote or a gas or electricity deal may be quite a simple case of comparing like-for-like, with mortgages it is not quite that simple.
For most people, taking out a mortgage will be the single biggest financial commitment of their lives. And for many, it is a very emotional one, too. So it’s not one they want to discuss with a machine.
And what about protection? One of the most important jobs of a mortgage broker is to ensure the customer understands the debt they are taking on and that they have the right protection in place should anything happen to prevent them from being able to pay the mortgage.
All those buying a house know they need a mortgage, but they may not know they need protection. Customers in the UK need to be sold protection and using an app or a PC is not going to do that.
We already have a situation where around 14.5m people have a mortgage, but only half have protection. This means around 7m people in the UK are at risk of losing their homes if something were to happen to the main breadwinner and this is worrying enough.
But if robo-advice starts to take the place of brokers across the UK, this number will grow.
Quite frankly when treating customers fairly is one of its central tenets, I am astonished the FCA is allowing robo-advice to evolve without this very important issue being dealt with.