Death knell for robo advice?

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May 21, 2019

Is robo advice a fad or a service ahead of its time? It’s a question I asked myself when I read about Investec closing their Click & Invest consumer digital platform that it launched just two years ago. This follows the decision by UBS to close its own direct-to-consumer investment platform last August, again just two years after it launched. Both firms quote limited or low demand for the service.

Launching and running such a service involves eye-watering amounts of money, not least because of the marketing involved to reach consumers to inform them of the platform’s existence and to convince them to use it. Investec announced the decision to close means they are writing off £20 million in operating losses and software costs.

Increased competition

Although two have bitten the dust, Nutmeg continues to be bullish about its model, although it announced in March this year that it plans to raise a seven-figure sum from its own customers via a crowdfunding campaign, admitting it has struggled to turn its popularity into profit.

There’s also a new player on the block: InvestEngine has just launched, with the aim of challenging Nutmeg on price. It has the backing of the co-founder of Gumtree, so we have to assume there are deep pockets to fund the marketing campaign.

Purple Bricks of advice?

Perhaps a rather worrying development for advisers is Nutmeg’s launch of its advice service, which offers its customers financial advice for a flat rate of £350. It sounds like the equivalent of Purple Bricks in the property market, which claims to offer sellers the opportunity to sell their house without the need to use a high street estate agent who typically charges a percentage price linked to the value of the property.

Speaking on a recent FT Adviser podcast, a Nutmeg spokesperson stated she didn’t believe the service had taken business away from traditional advisers, commenting that most of its customers had not previously received formal financial advice. She did say though that some people, when looking into taking advice, were lured by the flat rate fee, seeing it as a big saving.

Of course, for that price, Nutmeg’s ‘advice’ service will have huge limitations. Should advisers be worried? Advisers who regard themselves primarily as investment specialists may well be due a few sleepless nights. For the advisers who recognise and appreciate that their clients look to them for far more than simply investment advice, I’m pretty sure they have little to fear.

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PortfolioMetrix are a multi-award winning, innovative investment manager that provides independent financial advisers with an alternative way to access discretionary investment management for their clients. Our proposition comes at a competitive price and doesn’t compromise the adviser/client relationship. The London winner of the Citywire Wealth Manager Regional Stars award for two consecutive years, voted the WM Small Business of the year, in association with ARC 2018 and, in 2019, have received the accolade of PA Discretionary Manager of the Year. Our proposition offers the convenience of online model portfolios yet delivers customised portfolios, tailored to individual client requirements. Investment performance has demonstrated consistent and reliable risk and return separation of portfolios that doesn’t undermine the financial planning process. This is achieved through our academically-robust, risk-based investment approach. WealthExplorer™ is integral to the PortfolioMetrix customised service. A proprietary owned and designed software system, WealthExplorer™, is purpose built to equip advisers with a broad range of tools designed to deliver unique client insights that add value to the adviser/client relationship and ultimately delivers better client outcomes, when utilised by financial advisers.

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