“Interestingly they both tried, at least initially, to appeal to a much more affluent client, with a minimum investment of £10,000, but ended up being in no man’s land and not appealing to anywhere near enough consumers to make a real go of it.”
Like Nutmeg, the likes of Wealthify, Scalable Capital, Moneyfarm, Wealthsimple all started as fintechs rather than having institutional parents, and all have now secured the backing they require.
“Importantly, all recognised that a D2C-only model would not be sustainable, and each now support strong B2B(2C) services, too. In the cases of Scalable and Wealthsimple – B2B(2C) is the dominant model. Other tech-based firms recognised much earlier that B2B would be the right way to go: Evalue, Ignition Advice, and Wealth Wizards are good examples,” Bussy adds.
For some robo-advisers like Nutmeg that had recognised the limitations of the model, they sought to hire financial advisers, to create a more hybrid proposition.
Woldemichael says: “Demand and usage of automated investment services are on the rise across all affluent groups, so meeting this demand is necessary.
“But the hybrid approach is the winner. Although investors are warming towards algorithms managing their wealth, they do also want access to a human adviser to help meet emotional needs among other requirements. Hence, many robo-advisors have added a human aspect to their proposition, including Nutmeg.”
Bussy says: “There will always be groups of customers who like to do things themselves, just as there are those who need a bit of guidance or even advice. The move to a more hybrid model is nothing new – businesses such as OpenMoney in the UK and Personal Capital and Vanguard in the States recognised the reassurance of an adviser should be integral to the proposition.
“Others have introduced advisers into the mix after initially being fully automated only. Interestingly, Wealthify has stood firm on this one; it will be interesting to see whether the Aviva-backed proposition follows the crowd or retains its differentiation, and whether this differentiation wins clients in a crowded space.”
M&G Wealth is one major provider to have recently announced plans for a hybrid proposition, underpinned by Ignition Advice technology that sits within the wider M&G Wealth business, flanked by their partners providing face-to-face advice for more complex situations, and a pure digital experience under the M&G Investments brand.
Heather Hopkins, managing director of NextWealth, says being backed by a larger company can be really important for credibility for consumers, and that the hybrid approach enables advisers to concentrate more time on interacting with the client.
“The potential for hybrid advice is to automate a lot of the things being done in a financial advice business to support the advice process, so advisers can work with more clients and focus on the activities that allow them to add value, like behavioural coaching, really understanding their client goals and needs, rather than chasing information from providers.”
