Nut cracker: Robo-advice is a double misnomer

Every other day someone else announces their new robo-advice offering. Except, as our technology spotlight regularly points out, robo-advice is a double misnomer. It does not involve robots and, while the algorithms involved can suggest, recommend and cajole punters towards an appropriate portfolio, regulation decrees that they must never advise.

It is early days, but the offerings available vary widely in capabilities. Some feel like the next stop in humanity’s inevitable progress towards hoverboards, while others seem to offer no more sophisticated profiling than those fortune-telling fish, which curl up in the palm of your hand to let you know if you are feeling happy, jealous, coy or whatever.

As a Christmas cracker novelty, the fish are only ever put to the test in the middle of an entire day shut indoors with my family, so the fact they can tell me I am anything other than homicidal highlights their shortcomings.

I digress. Despite the many possibilities offered by robo-advice, many advisers’ response has been negative. As far as I can see, this is partly because of the misleading label suggesting it will somehow replace traditional advice but mostly because people’s instinctive reaction is to assume anything new is bad.

As one of the most established names in the nascent market, Nutmeg has attracted the majority of the opprobrium. Most recently several advisers had a pop because they claimed its offering was veering too close to the second part of the soubriquet, and might even be providing advice.

The charge was vigorously denied and, to be honest, as with most adviser moans about the service, the gripes seemed to be based more on fear than any genuine problem.

Nutmeg is a fascinating and compelling proposition. While reluctant to apply the robo-advice label to itself, it does tick a lot of the boxes, profiling prospective punters before channelling them into one of 10 predetermined portfolios.

I am sure that the number of traditional advisers Nutmeg has put out of business so far probably remains at zero

The experience it offers is smooth and simple and streamlined. There is a huge demographic for whom it is a brilliant solution.

But however good it is, I am sure that the number of traditional advisers Nutmeg has put out of business so far probably remains at zero.

While its user numbers are growing, they can still be measured in five figures, and in the face of year-on-year losses (not unusual for a company this early in its existence) it is the significant backing it has received from Schroders among others that has maintained its lofty profile.

So why do so many advisers see it as a threat? It feels like many of you are, Canute-like, railing against the sea, despite it being obvious that the speed of technological advance is a tide that you have no hope of stopping.

Is there a fear that, if the masses get access to even rudimentary tools, there will be no need for advisers? Let me reassure you with one simple but universal truth. People are fundamentally lazy.

There are pretty comprehensive instructions to do anything easily available online, but I would rather call in an expert to do just about any of them. I can paint a room, but I’d rather pay someone else to paint it for me. If I were up in court I would pay a lawyer over representing myself every time.

I tried brewing my own beer once, but it was a long, drawn out process for a result that wasn’t as good as I was willing to pay for elsewhere. I could have persisted in honing my homebrew skills, but if I’m honest I couldn’t be bothered, and your clients are the same. Even if they have the tools available, they will be happy to pay someone else to use them to their fullest potential.

People will always be lethargic. It’s why auto-enrolment has worked so far. There has been no discernible increase in interest in pensions but as soon as you make opting out require the effort rather than joining, the masses will stick with a savings scheme.

Even if people did show the inclination to do any of this themselves, advisers should do more beyond filling in questionnaires with clients and then offering an off-the-shelf solution. That way Nutmeg won’t be a threat, it will just be a simple service which is probably the best solution for a lot of people advisers are not interested in anyway.

Having better toys is not all it takes to do your job. If you only offer 10 different solutions, you might as well let Nutmeg take your place, but I know most advisers can show a demonstrable difference based on much more than just the tools you have access to. Although I feel that some advisers need to believe that themselves before they worry about convincing anyone else.

Let Nutmeg have its corner of the market. The onus is on you as advisers to protect yours by selling yourselves and the value you can add. The problem might be that that will also require some effort.