Online service Money On Toast, which purports to offer ‘free’ algorithm-based investment advice, is finalising deals with several advisory firms to use a white labelled version of its software, enabling IFAs to target the mass market through simplified advice.
The move follows the announcement earlier this week that the firm had outsourced its administration to Equiniti, replacing FundsNetwork and Cofunds as external platform providers.
Money On Toast will continue to provide all client facing services, including risk profiling and investment recommendation processes, while Equiniti’s new ‘wealth solutions’ outsourcing platform will undertake all investment administration, including portfolio rebalancing.
Speaking to FTAdviser, Charlie Nicholls, founding partner at the firm, said that the white labelled solution enables partnerships with other adviser firms to help close the advice gap.
“Advisers can use our technology, branded to them, and offer an online, automated service to their clients.
“They can charge whatever advice fee they like to their clients. When a client transacts, the money flows into our platform and portfolios as these are integrated into the system. The direct fund management and settlement costs that are charged are highly competitive and lower than most advisers would be able to get elsewhere.
“We have our first few adviser firms coming on board shortly and have garnered a lot of interest from other parties in the industry.”
Responding to those that have questioned the ‘free advice’ model, Mr Nicholls stated that the service is free to use, but is restricted to parent company CPN Investment Management’s offering.
“Our research showed that clients didn’t want to pay upfront charging when transacting online. Therefore, the service is free until the client actually wants to transact, which is when charges start to apply,” he explained.
Money On Toast has only been going for two years, coming as a response to the Retail Distribution Review and an expectation of the so-called ‘advice gap’ expanding as a result.
A couple of other rivals have sprung up at the same time, but Mr Nicholls was keen to point out that other popular platform-based services such as Nutmeg offer a purely direct-to-consumer discretionary service with guidance attached, rather than advice.
“We offer advice to our clients and a discretionary management service; clients are therefore getting professional and regulated advice on where they should be investing. This means clients are getting more for their money and also have better protection under the FSCS.”
However, he added that the mass market advice space is huge and heavily under serviced, and welcomed new entrants to help fill the gap. Mr Nicholls said the lack of participants was down to a perceived lack of clarity around regulation
“The FCA is pushing for innovation and business structures such as ours, but the industry in general is saying they need more definitive clarity in order to commit the significant investment it takes to launch something like this.”
peter.walker@ft.com
