NatWest is launching a range of Isa-friendly investment funds for its digital retail clients to complement its upcoming robo-advice service.
NatWest Invest will be rolled out later this month on the NatWest website, allowing the bank’s customers to choose from a suite of five funds of varying risk levels, with a minimum investment of £500. Each fund will have a maximum fee of 0.95 per cent, and all investments can be held tax-free in a NatWest ISA.
This fund service is in line with the bank’s ongoing commitment to its digital client base. A robo-advice service is expected to be implemented by the end of 2017 at the bank, and recent branch closures have signalled its shift towards online and mobile banking.
“People are using digital services more and more; the majority of our main bank customers are banking with us either online or mobile,” said Les Matheson, chief executive of personal and business banking at NatWest’s parent company RBS.
“If customers are visiting certain branches less and less then we will close them and find other ways for them to bank with us.”
The NatWest Invest service comes in the wake of the Financial Advice Market Review by the Financial Conduct Authority and the Treasury, which found that many people cannot afford financial advice and do not have the expertise required to invest.
As a result, the Treasury and the FCA tweaked the definition of “financial advice” to make it easier for high-street banks to offer cheaper and simpler "guidance" services. NatWest, like many other high street banks, has responded by scaling back its face-to-face advisory services, and focusing on online alternatives instead.
Independent financial adviser Owen Cook, of Ablestone Wealth Management, brushed off concerns that NatWest Invest will have an immediate impact on advisers, and urged the bank’s customers to understand the limitations of the service.
“Robo-advice assumes that financial advice is all about delivering a return to people, but there are two things to consider – there’s financial planning and there’s financial advice,” said Cook. “If people are only interested in saving a certain amount of money per month and paying a certain amount for it, that’s fine.
“Value for us is not just about alpha in terms of how well you’re performing compared to the benchmark. It’s about long term results, keeping your finances on track, and making sure you get the best tax rates.”
Cook pointed out that robo-advice only works for the proactive investor, whereas most people tend to be reactive investors. This makes it unlikely that existing customers of IFAs will defect to schemes such as NatWest Invest, although it could signal a long-term shift in the sector.
“What will be interesting to see is how does a millennial view this,” added Cook. “There could be a new wave of graduates coming through who can’t afford financial advice, using this now, so in 20 years the financial advisory landscape could look very different.”