Robo-advice 

'Robos are coming nearer to the IFA market'

'Robos are coming nearer to the IFA market'

Advisers have been warned they are putting their businesses at risk if they do not invest in fending off robo-advisers.

Lester Petch, the chief executive of TAM Asset Management which offers a white labelled discretionary fund management solution to advisers, said robo-advisers were gradually moving closer to emulating the service advisers offer.

He cited recent news that increasing numbers of robo-advisers are hiring human advisers to provide support to their clients.

Mr Petch said advisers needed to consider streamlining their systems to work more efficiently and speeding up transaction processing time, which he referred to as "straight through processing".

He said: "If advisers don't engage with straight through processing and robo-advice then in five or six years' time they could find themselves in a difficult position.

"The robos are coming nearer to the IFA market. They are willing to lose a lot of money to get at the market and if they start offering advice for £200 then advisers are under pressure.

"Where does that stop? Does it stop here or does it stop when the robo-advisers end up becoming IFAs because that's where the market is."

Mr Petch said this move by robo-advisers may have been spurred by the fact many clients who want to invest, do so already and do it through an adviser.

TAM's white labelled DFM, FinchTech, is created to offer advisers a service they can refer people to if they don't wish to offer them advice - for example if they don't have enough assets.

It is non-advised and offers a series of risk-rated portfolios.

Unlike financial advisers, most robo-advisers only offer risk-rated portfolios of investments, usually passive ones.

Schroders-backed Nutmeg is currently looking at introducing human advisers into its service, while rival Scalable Capital, in which Blackrock has a large minority stake, has recently done just that.

Last year Nutmeg saw its losses increase to £9.3m for 2016 and it has yet to make a profit since it was launched in 2012.

Meanwhile Scalable Capital made a loss of £956,000 in 2016 while Moneyfarm made a loss of £6.3m.

Research by consumer financial education website Boring Money found robo-advisers were spending up to £500 on acquiring each customer.

damian.fantato@ft.com

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