Hybrid advice will be essential in plugging the gap between financial guidance and so-called “full fat” advice, financial planning software firm EV has insisted.

In a report published today (25 April), it said there are “clear opportunities” for advice firms to use digital and hybrid advice as a part of their customer propositions.“Digital and hybrid advice makes it both simpler and more cost-effective to serve more clients successfully,” it added.

“If we look at where we are in the market today, in terms of individuals getting support and help, the two fundamental ways people do access support is either guidance or the traditional advice route,” EV managing director Chet Velani told Money Marketing.

“Guidance is more of a mass-market proposition. It can work well for less complex areas like simple investment and pre-retirement.

“But I think, for most people, when it gets to more complicated areas like at retirement or in retirement, guidance just doesn’t go far enough.

“Guidance offers a mass market solution, but with no personal recommendation,” Velani added.

On the other end of the scale, he said, traditional advice is mostly a manual process. But that means it is quite expensive.

“If we look at retirement, for example, an individual is likely to pay somewhere between £2,000 and £3,000 for advice,” he added. “That just isn’t affordable for most individuals.”

The report pointed out that hybrid and digital advice are not a ‘one size fits all’ proposition.

“Every firm will have its views on, among other things: the mix of human support and digital advice; the order and priority of advice areas to be addressed; and how to integrate a hybrid and digital proposition with traditionally delivered advice,” it said.

“This last point is important because traditional advice may be identified as more appropriate for some customers in going through a hybrid and digital process.” It said this might occur, for example, where more than one financial need area needs to be addressed simultaneously.

The report outlined numerous areas where hybrid and digital advice can be deployed, including investment, pre-retirement, at-retirement, in-retirement, product consolidation (mostly pension switching), mortgage protection, family protection and inheritance planning.

Digital algorithm-driven advice could serve the mass-market with simple needs, with hybrid and digital advice supporting those with more complex requirements.

Traditional advice can, of course, remain in place for the wealthier segment who value the full attention of advisers and can happily pay for it.

“Some customers going through a hybrid and digital process may decide that traditional advice better meets their ongoing needs,” the report added.

“Similarly, customers with access only to guidance may decide that low-cost hybrid and digital advice gives them the comfort they need.”

Velani said: “What we’re trying to do with digital and hybrid advice is to support those individuals who are in the advice gap, where guidance doesn’t go far enough, but can’t go for traditional advice.”