Back in the day, cabbies were just blokes with a horse and cart you paid to give you a lift. However, because they often ripped off the public they became regulated London taxi drivers with a meter and 1,000 rules that made them top-class and expensive.
Eventually, the fact there were so few of them led the great and the good to invent a much less arduous set of rules and create the mini-cab industry. This filled the gap nicely, even if it was never anywhere as good as the real thing.
Then an amazing piece of technology was invented that eventually made the mini-cab just like a proper taxi. Initially developed at a cost of billions by the US military, GPS became available for free to any mini-cab driver with a mobile phone a few decades later.
Cut to another decade or so on and the last piece of the jigsaw arrives: the app that connects the passenger and his credit card directly to the mini-cab driver and his bank account. The app that utterly changes the mini-cab experience, so that all hassle is removed.
Uber has delivered the killer blow that will eventually turn proper taxis into mere tourist attractions rather than the critical part of urban life they have been for a century or more.
The app only needs to make a relatively tiny charge to make its fortune: the price of a cab ride has halved and yet the mini-cab drivers remain happy as they have plenty of work and no fights about cash in the middle of the night. Cheap, convenient and decent quality will clean up the market every time.
All that has a near-perfect parallel in financial advice. You see, not so far back in the day, there were blokes called brokers who sold financial products. But because they often ripped off the public, they became regulated and got 1,000 rules imposed on them that made them top-class and expensive.
And lo, right now, the great and the good are addressing the fact proper licensed advisers are so hard to find and so expensive by enabling the cheapo adviser.
There is no existential threat to the “proper” advisers until the much-heralded robo-advice can be delivered conveniently without humans but, when that does happen, the hugely lower cost of delivery could allow its owners to sweep the board just as Uber is doing.
However, the parallel ends there. Simplifying the complex process of risk assessment and investment choice always increases the risk of failure or at least very variable results, so the cost of constant algorithm maintenance, never mind that of client acquisition in a competitive market, might well eat away at that price differential. And without a big one of those there will be no board sweeping.
The Treasury may huff and a reluctant regulator may puff but I do not think anyone will be blowing down the advice house anytime soon.
Article first published in Money Marketing, 26.11.15