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Increased competition within the online wealth management, or robo-advice, industry is ongoing. The cutthroat climate has now led another robo-advisor to incorporate human-led services, a move that will be closely observed by other digital challengers says GlobalData Financial Services
GlobalData’s 2018 UK Investor Survey shows that 97.9% of the UK investors do not use robo-advisors when arranging new investments. Demand for automated investment services is increasing among young digital natives, but as they currently have small portfolios and are only building up their wealth, robo-advisors could be viewed as being ahead of their time. Big players with diversified revenues, such as UBS, can have the luxury of parking their purely digital services and waiting for demand to materialize. Nutmeg, for which a digital platform is the only source of income, has to find a way to survive.
Hence the launch of human-led advice is Nutmeg’s attempt to appeal to a new large pool of potential consumers. The robo-advisor is looking beyond its initial digitally-savvy target market to boost revenue, as its losses have been increasing year-on-year.
The move makes sense, although it comes with risks. A human-led service requires hiring a human team, going against the efficiencies of a digital service, and leading to a growing cost base. The company is trying to tackle this issue by opening the service to non-Nutmeg consumers and charging a flat £350 fee for advice that is actioned. This is expensive, however. GlobalData found that only a quarter of individuals are willing to pay more than £300 for financial advice – Scalable Capital charges only £200.
As long-term sustainability is on top of all robo-advisors’ minds, adding a human element to their propositions is the only way forward. It is likely that other robos will follow suit for the betterment of longevity – particularly if Nutmeg’s service proves successful, despite the high price tag.
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