Robo-advice  

Questions raised as robo advisers hire humans

 

Robo-adviser fees for a £100,000 investment 
Nutmeg1.04%
Scalable Capital0.75% fee plus 0.19% for the ETFs
Moneyfarm0.92%
Evestor0.52%
UBS SmartWealth1.69% for active and 1.19% for passive

"We are in the early stages of development and are currently looking to recruit a financial adviser to support our head of financial advice, Lisa Caplan, in this work. We expect to introduce a new service to existing customers this year and would potentially seek to grow the team to support customer demand."

Evestor is another robo-adviser which uses human advisers, as well as Canadian firm Wealthsimple, which launched in the UK last year.

Anthony Morrow, the chief executive of Evestor, said: "Human involvement was always part of the Evestor business model as we recognised that, despite advances in technology and also our customers’ willingness to engage digitally, money remains a very emotive subject and people like to have the comfort and assurance that a human voice can provide.

"There are obviously costs associated with providing human services, but these have always been built into our business model. The additional costs will mean that the journey to profitability could be longer but conversely the added benefits of having humans available may actually mean that we get there quicker than if we didn’t offer it at all."

Toby Triebel, European chief executive of Wealthsimple, said: "Human advice has been part of our core offering since day one as we strongly believe in building a human-focused brand in financial services, which we don't believe a lot of players in our industry are currently doing.

"In terms of scalability, we see clients looking to speak with an investment adviser when they first open an account, when they are making a big financial decision or around tax-year deadlines.

"We've grown to 65,000 clients globally and our investment adviser team has grown but not tripled in response as we also use technology to build more investment advice into our product to make it more helpful for people. What we're providing is a blend of human and technology."

Simon Bussy, director at Altus Consulting, said many robo-advisers were able to make the investment into including human advisers because they were backed by large financial services businesses.

Nutmeg, for example, saw its losses increase to £9.3m for 2016 but has received considerable investment from Schroders, while Moneyfarm, which is backed by Allianz, made a loss of £6.3m and Scalable Capital, which recently sold a stake to BlackRock, made a loss of £956,000.

Mr Bussy said: "While internal costs may rise by offering advice , this should be offset by a more attractive and expansive customer proposition and increased revenues.

"It’s unlikely the ‘robos’ will increase their fees to compensate for this increase in costs – it would make them an outlier in an already hugely competitive marketplace where attracting new ‘direct’ customers is already a significant challenge.