No need for robo-advice pioneers to fear arrival of big names
Shaun Port, Nutmeg
There is much talk about established wealth management firms launching their own digital platforms, but this would just bring more clients into the online world, argue the start-ups
Anyone who believes the start-up firms which have pioneered robo-advice in the UK are worried about the recent launch of the UBS SmartWealth platform, and the ongoing speculation that US giants such as Charles Schwab and Vanguard are about to make a move across the pond, are missing the point.
That at least was the claim made by representatives of some of those pioneering firms at a discussion on the future of robo-advice held a stone’s throw from London’s Smithfield meat market.
“The likes of UBS and Vanguard coming in just prove that this way of managing money is the future,” said Adam French, founder and CEO at Scalable Capital, the Munich-based digital investment manager which launched in the UK in 2016.
But he is not expecting a sudden rush of activity from the bigger names. “All of these banks are sitting on old platforms that don’t talk to each other. It is not as if they are going to be able to get involved in this space without spending huge amounts of money.”
New players coming in would “really open up the market”, insisted Shaun Port, chief investment officer at Nutmeg. “It would be great for us if big banks go out and tell people there are other ways of investing.”
It would be great for us if big banks go out and tell people there are other ways of investing
There is a certifiable advice gap in the UK market, he said, which digital wealth management can help fill. But Mr Port spoke about the danger of this becoming just another way for banks to push their own products. “This should be about building ongoing relationships with clients, albeit in a mainly digital environment,” he said.
The UK marketplace may already be beginning to look a little crowded, although the three robo-advisers present at the event all target slightly different audiences. Scalable Scalable Capital, which manages around £150m ($187m) for 5,000 customers, has a minimum investment of £10,000, perhaps putting it in competition with UBS SmartWealth, which asks for £15,000.
Nutmeg, which launched in 2012 and now manages £700m for 30,000 clients, has a minimum investment of £500, down from the £1,000 it originally demanded. Cardiff-based Wealthify, also present at the event, is the most mass market of them all, with just £1 needed to open an account. It launched in April last year.
The start-ups may all be operating in slightly different niches, but all agree that the term ‘robo-advice’ is not fit for purpose.
“The term robo-advice is misleading,” said Mr French. “We would never say we provide advice. We manage money for people, but we aren’t advisers. ‘Robo’ cheapens what we do. It makes it sound like we use automation to provide something more simple, but this is about using technology to provide something more sophisticated.”
It also means that any firm with an online presence can be labelled a robo-adviser, said Michelle Pearce, CIO and co-founder at Wealthify. “We do tend to get lumped together. People don’t understand the difference between financial advisers, wealth managers and robo-advisers.”
Both clients and the firms themselves hate the term, admits Nutmeg’s Mr Port, but it is not without its uses. “In a way it is quite helpful as it does give us a category. When we started we had to spend a lot of time and effort explaining to people just what it is we were trying to do.”
But the panel were not able to agree on a suitable replacement term. ‘Digital wealth’ and ‘robo-investing’ were both suggested, though Mr French opted for something much more simple.
“Why not just call this investing?” he argued. “Robo is just a term that get used whenever someone develops new technology. Hopefully we will drop that eventually.”
