JLT Employee Benefits has surprised the industry by shuttering robo-adviser Moola just 18 months after it acquired the business off founder Gemma Godfrey.
In a letter sent to clients seen by Portfolio Adviser, the digital investment manager said it had “regretfully decided” to fold after a strategic review. The business will officially close its doors on 27 February 2020 and monthly payments will stop being collected from 17 January 2020.
Customers will have 30 days to notify Moola to liquidate their investments into cash. The robo adviser offered to reimburse capital gains tax incurred provided there is satisfactory evidence.
Godfrey sold her business to JLT Employee Benefits in July 2018 for an undisclosed sum.
At the time JLT CEO Bala Viswanathan described the employee benefits firm as the “right home” for the robo-adviser given their shared ethos. Viswanathan said the digital investment manager would enhance its financial well-being offering.
The numbers don’t stack up for robo advisers
Boring Money founder and CEO Holly Mackay told Portfolio Adviser it was surprising that Moola was folding so soon after it had been acquired.
But Mackay noted the closure made sense given the extreme cost pressures of doing business in the robo advice sector.
“The numbers don’t stack up,” she said. “Average account sizes have risen to all-time highs of £6,800 across UK robo advisers. But average acquisition costs will be north of £150. With revenues in the 0.75% – 1% region, you can see that break even is a grim calculation.”
Moola is the latest online wealth manager to fall by the wayside. Last October Fountain, which was set up by a pair of ex-Citigroup traders, was forced to close its operations, while robo advice offerings from Investec and UBS also crashed out in 2019.
Nutmeg, the UK’s largest robo adviser, has been plagued by widening losses which ballooned to £18.6m last year.
Mackay predicted that 2020 would bring more closures in the digital advice space and further consolidation.
Robo advisers have been singled out as the type of provider that would be hit hardest by Vanguard’s planned push into the UK advice space.
Machines struggle to replace human financial advisers
Nextwealth managing director Heather Hopkins said she sees little evidence to suggest robo advisers are filling a gap in the advice market.
“Financial advisers supported by efficient and powerful tech is a far better solution to offering advice to people who need it,” said Hopkins. “The focus on innovation in recent times has been on replacing the human adviser. But the interaction with the human has proved to be effective both in converting savers to investors and in gaining a full understanding of people’s money goals.”
“It does show how difficult it is out there,” said Open Money CEO and co-founder Anthony Morrow on Moola’s closure.
In order to be successful digital advice businesses not only need to be competitively priced but also have a compelling proposition or strong distribution, Morrow said.
“There feels a lot of similar services out there which involve an Isa with a portfolio of passives for about 1% all-in which makes it difficult to be heard in a busy space. Unless you’ve got stacks of cash and even then (Investec for example) it’s bloody difficult.”
Moola’s short history
But Hopkins added there were valuable lessons to be learned from Moola that “not only innovated on the mechanism of the delivery of advice but also in the way it spoke to customers”.
Founded by Godfrey (pictured) in September 2015, Moola officially made its debut in early 2017 with investment giant Blackrock agreeing to provide the firm with research and access to its core suite of ETFs from its iShares range.
The online wealth firm attracted attention from venture capitalists Odysseus Investments and Run Capital who supported an initial funding round alongside a consortium of private investors.
