Why robo-advice poses no threat to specialist lending – Brightstar

The FCA’s Financial Advice Market Review report recently called for greater and more accessible financial services advice for consumers in the UK. In light of this, Habito has launched a Digital Mortgage Adviser which essentially allows consumers to discuss their mortgage requirements without needing a human intermediary.

Interestingly, this news comes just weeks after research from Legal & General Mortgage Club revealed that 35% of intermediaries feel that technology and, more specifically, robo-advice, poses a real threat to their business. But what about the specialist market?

The specialist sector is just that; specialist. In other words, it is non-conforming, it is not based on a tick box system of processing and application and, more importantly, you cannot expect even the most sophisticated computer model to do what an intermediary does. Due to the very nature of specialist cases, the vast majority of lenders use human underwriting, each case is dealt with on an individual basis and also caters for those with impaired credit, highlighting how intermediaries cannot be replaced by a computer.

It can be argued that robo-advice could help to commoditise the market. However, I believe that due to changing consumer behaviour and the FCA’s support, there is a possibility that online mortgage applications have a place in the market, but only in the straightforward, vanilla, low-LTV world. However, I cannot see how automated advice will ever infiltrate the specialist market, especially in terms of residential and specialist buy-to-let mortgages, and particularly as client relationships and adding value to the advice process itself are the best ways to preserve a client bank.

Although it is good to see new, innovative products coming to the market, I can’t see these types of services taking off in the specialist sector. However, it is likely that robo-advice and digital technology will continue to play an important role in the vanilla mortgage market as well as a supporting role in the specialist market. I therefore believe specialist cases will continue to be assessed by an experienced underwriter, rather than an automated system, and face-to-face advice which allows for better rapport and trust-building, will ultimately continue to lead the way.