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Wealth Wizards on how first robos will take market share

Wealth Wizards on how first robos will take market share

Robo-advice is unlikely to grow rapidly until big incumbents start investing in it, the Wealth Management Association’s fintech conference has been told.

Pete Connell, managing director of Wealth Wizards, said he was unconvinced there was a “whole set of new clients” looking for robo-advice.

Speaking at the conference in KPMG’s offices in Canary Wharf, he said: “The incumbents will massively benefit from this. The start-ups come and join the market but the big boys sell it to their client banks and take market share. It is coming.”

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Giovanni Dapra, chief executive of MoneyFarm, said it was a “no brainer” for incumbents to move into this space.

Speaking at the conference yesterday (7 September), Mr Dapra said: “I hope that won’t happen soon because it creates two, three or five years of opportunity for us to establish ourselves.

“I hope it will be down the line when the incumbents come. It is a game of cat and mouse but I don’t think the question is whether you have to do this as an incumbent. We are past that.”

MoneyFarm was originally founded in Italy in 2011 and already had more than 60,000 active users in that country before launching in the UK earlier this year.

Mr Dapra said that according to his estimates the robo-advice market could reach around £25bn in size in the UK in the next three years.

His comments came after last month a report claimed robo-advisers could take up to a decade to make a profit from their clients.

Analysis from IRN Consultants highlighted recent research which showed that each new robo-advice customer signed up was losing the company £162.50 on average in the first year and only making £17.50 in subsequent years.

This would mean a client would have to be retained for the better part of a decade just for the company to break even from them - assuming the robo-adviser’s business model didn’t change.

One of the companies the report pointed to was Nutmeg, whose accounts for 2014 showed revenues of £635,000 compared with operating expenses of £5.9m.

Speaking at the WMA conference, Wealth Wizards’ Mr Connell said it was a really interesting question how big an opportunity robo-advice was and whether companies should change their whole business plans as a result of it.

It was last year that LV took a majority stake in Wealth Wizards, increasing its capital to allow the development of its white-label algorithm based platform.

As part of the deal with Wealth Wizards, LV’s in-house regulated telephone retirement service Cora uses its advice platform to generate personal advice for pension savers planning for retirement.