online only advice threat or a gift

The proliferation of online only advice propositions might seem a thorn in the side of traditional firms, but could your business thrive in cyber space, and would you want it to?

online only advice threat or a gift


The unifying premise behind all these sites is that with relative ease and efficiency, and in their own home, investors can access advice or guidance on platform we have all become so familiar with in our day-to-day lives.

Old-school advisers may scoff and say nothing can compete with face-to-face advice when it comes to gauging what is suitable for an individual. But in a world where people are banking, grocery shopping and keeping up with their team’s progress in the local derby, taking the next step towards accessing financial advice probably does not seem so absurd – particularly if they are first-time investors.

Start of a wave

Nick Hungerford, CEO and co-founder of, likens people’s nervousness towards online advice to how they felt about online banking a few years ago.

“Now there are very few people who go in-branch to do their banking and we think to ourselves, ‘why did I ever want to do that?’,” he says.

From his background as a stockbroker, Hungerford says he set up Nutmeg because of a frustration with the exclusivity and lack of transparency in the investment world.

That was three years ago and he now describes the site as “the UK’s first online discretionary investment management company”.

Nutmeg charges investors a base rate of 1% for its service, so investors can get advice on a £1000 “for the price of popcorn and a drink at the cinema”, as Hungerford puts it.

Users of the site can reduce their fees by investing larger sums of money, inviting friends and by staying loyal – every six months they stay with Nutmeg their fees will lower.

Regulator’s view

As the FSA quite rightly mandated under the retail distribution review, however, performance and low fees is not enough when it comes to advising consumers where to put their cash.

Suitability is crucial and to make sure an investment suits a client a risk assessment must be completed.

So how important is kinesics (that’s body language to you and me) in working out an investor’s risk appetite? Perhaps not as vital as you might think.

A friend of mine received face-to-face financial advice when she was setting up her pension at work and the experience left her so enraged it took her a year before she actually started contributing.

In discussing her risk the adviser said: “Are you sure you want to put some money in emerging markets dear? I could tell as soon as you came in that you were a conservative investor.”

An extreme example maybe, but no less patronising as far as she was concerned.

Sense check

But for those good advisers out there who spend time getting to know their clients before making any recommendations, the lack of sense check afforded by communicating only online seems a bit galling.

This is something the FSA is keeping an eye on and the up-and-coming sector of the market may well find itself under thematic review faster than you can say ‘click’.

But with the eradication of visits to clients, lower overheads in terms of administration and bureaucracy it is easy to see why the business model appeals to some advisers. 

We have long been told that the RDR would herald a new wave of innovation in financial services, and where the internet and innovation combine some pretty compelling ideas come about: think Google, think Facebook, think Amazon.

Maybe you’re not ready to trade the comforts of talking with clients over a cuppa with the clinical world of online, but if it makes business sense then remember fortune favours the brave.




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