Robo-advice is not a ‘silver bullet’ for solving the advice gap and must be approached with “some degree of caution”, the Personal Finance Society has warned.

Responding to the Financial Advice Market Review, the professional body suggested technology has an important role to play.

But the PFS told the Government and FCA in its consultation response that so called robo-advisers or automated advice should not be seen as the be all and end all.

It said: “Emerging technologies offer an opportunity for cost effective, efficient and user-friendly advice to be provided to the mass market. Currently, regulatory uncertainty is suppressing supply and deterring market participants from fully embracing this opportunity.

“This said, we do not believe Robo-advice is, on its own, a ‘silver bullet’: technology of varying kinds has been embedded within the advice process for decades and a degree of human interaction from knowledgeable and professionally qualified individuals will remain critical to the avoidance of formulaic, process driven future mis-selling and mis-buying.”

The PFS report stated: “Robo-advice has a place, but on its own it is not an adequate solution to the advice gap, especially against a backdrop of new pension freedoms and the scale of savings crisis in the UK.

“More fundamental structural change to the market as suggested within this submission is, we believe, needed. Furthermore, low cost advice doesn’t necessarily mean robo-advice as the cost of non-automated advice can be reduced if regulatory bureaucracy is similarly curtailed.

“Human interaction is, and will remain, fundamentally important – without it there will be a significant loss for the consumer in not having his/her emotional and psychological temperament understood and reflected in the way advice is dispensed and outcomes generated.”

It cited a warning in May 2015 from the US financial regulator to investors and advisers to beware the limitations of automatic investment tools, specifically economic assumptions, framed questions and depersonalised recommendations that do not properly take into account changing circumstances or investment time horizons.

While robo-advice in the USA has been growing rapidly it would be “important to recognise the difference in regulatory treatment and ongoing liability for the supplier”, the PFS said.