Online wealth manager Nutmeg has launched a personalised financial advice pilot service, but industry figures have raised concerns over whether the fees are too low to be profitable.
The service offers customers one-on-one review by being able to speak to a professional adviser over the phone and receive personalised financial advice and fund recommendations.
Customers can get started in 15 minutes with an initial chat free of charge and £350 thereafter for tailored recommendations.
CWC Research managing director Clive Waller said it is a very “interesting development”, following on from Wealth Wizards advice on ‘at retirement’ issues for a small fixed fee, while Next Wealth managing director Heather Hopkins argued it could be “a restricted advice proposition”.
Bella Caridade-Ferreira, CEO at Fundscape, said the launch proves that pure robo-advice hasn’t worked so far.
“People like the comfort of advice even if it’s just to confirm or steer them in the right direction,” she added.
Tough to be profitable
Following the FCA’s Financial Advice Market Review in 2015, Nutmeg said it set out to explore ways in which affordable and accessible financial advice could be made available to everyone.
However, it will be “tough to be profitable” at £350, said Hopkins. “I like the ambition to offer low cost advice but fear that the price is too low to sustain,” she said.
“But, it is a good way to get customers across the line. It should increase conversion rates from prospects to investors.”
Likewise, Caridade-Ferreira said: “The flat fee is reasonable if they can provide a good quality service at this price. It’s probably the missing link they need to grow the robo and I suspect it will be the growth catalyst Nutmeg has always needed.”
Plenty of advisers?
In the UK, just 9% of people use a financial adviser, dropping to 6% of 35 to 44-year olds, according to Nutmeg.
The online adviser said based on its own analysis of FCA and ONS data, for each financial adviser, there is a queue of 2,550 people in the UK.
Lisa Caplan (pictured), head of financial advice at Nutmeg, said too few people know what sort of financial advice is available, how it could help them or where to find it.
“The scarcity of financial advisers, prohibitive costs and an industry happy to neglect swathes of the population, means many people are faced with making big financial decisions on their own,” she said.
However, Waller challenged Nutmeg’s analysis, stating there is no queue awaiting financial advice and this is a “horrid misuse of data”.
“The silly quote implies that every man, woman and child in the UK is waiting to see an adviser. What utter crap.
“Plenty of advisers are looking for clients. You’ve never heard anyone outside the industry saying, ‘Oh dear, I am so worried, there is a shortage of IFAs and I just can’t find one.’”
But Holly Mackay, founder and CEO of Boring Money, said the industry has reached an “impasse” and there are not enough financial advisers to go around.
Radical change
Caplan added that Nutmeg is assessing the same financial circumstances that a traditional financial adviser would, but by using technology, it gives people the freedom to do it at a time that suits them at a fraction of the cost they would face from an IFA.
“It’s little wonder that the UK is facing such an enormous savings gap when financial advice has been so slow to adapt to changing customer needs,” she said.
“In the next few years the way financial advice is given is going to radically change. People are used to interacting with technology to make so many aspects of their life easier, financial advice is no different. We’ll only be able to solve the advice gap with greater digitisation.”
