The firm’s head of financial advice Lisa Caplin admitted that Nutmeg will not charge for the advice feature it is in the process of developing, involving an automated phone service.
Instead, it may offer extra services alongside advice which customers can pay for.
“My initial approach is not to charge [for the service] because there is no marginal cost for it,’ she said.
“You can go the route of having extra [paid for] features on certain websites, but we haven’t decided if we are going to do that,” she said.
Caplin, an ex-Towry adviser who was hired by Nutmeg in April, added that the advice proposition is aimed at addressing the UK’s ‘advice gap’ and will cater to those at the lower end of the market who may find themselves excluded from accessing traditional advisers.
Redefining advice
It’s unclear whether the service will provide advice or guidance, with Caplin admitting it may be impacted by the UK government’s plans to redefine what it considers advice.
In September, the UK Treasury launched a consultation on changing the definition of financial advice, so that only a personal recommendation for a product is considered advice which will be regulated.
The move follows the recommendations made earlier this year in the Financial Advice Market Review (FAMR), a joint review by the Financial Conduct Authority (FCA) and Treasury into how to make advice and guidance more easily accessible.
A spokesperson for Nutmeg confirmed that new service is still going through “the testing stages with customers to determine the best course of action”.
“We’ll update once we have more detail,” she said.
Nutmeg losses
The new proposition comes amid a gloomy outlook for online investment platforms such as Nutmeg, often referred to as “robo-advisers”.
Over the summer, two separate reports highlighted the challenges facing the industry with investment management firm SCM Direct stating in July that UK robo-advisers are financially unviable and most will go bust before acquiring the sizeable assets under management needed to survive.
A month later, research by IRN Consultants found that services such as Nutmeg are likely to be unprofitable for years to come.
Nutmeg posted a pre-tax loss of £9m ($10.9m, €10m) in 2015 as marketing and staff costs hit £10.8m, though it reports that assets have doubled.
Financial statements show the company’s pre-tax losses nearly doubled from £5.3m in 2014 to £9 m in 2015, despite turnover rising from £635,000 to £1.7m over the same period.
