While robo-advisers' client base remains very different from IFAs' own, Sam Turner, senior consultant at Altus Consulting, said the takeover spoke to a change in advice expectations.
“It speaks to this continued acknowledgement amongst the larger wealth managers that future generations of investors have very different expectations around the way that they consume services that they’re paying for,” he said.
He referenced the estimated £350bn that is due to pass down to the next generation within the next ten years, saying millennials had "very different expectations" around the way in which they consumed advice.
“They [advisers] are not going to get away with an annual meeting - people will expect to consume the service as and when they have advice needs and digital provides brands like JP Morgan with the opportunity to do that.”
He added the takeover was not surprising given the acquisition trends seen across the market, but noted it was still very difficult to make a profit in the robo-advice market.
“Nutmeg is a great example of that. In terms of Aum they are probably the largest in the UK but still continue to fail to achieve profitability and that’s something we’ve seen for quite some time.
“The reason for it is that you’ve got a small fee being taken as a percentage on a relatively small pot.”
Mike Barrett, director at the Lang Cat, said the service's lack of profitability made the deal interesting.
“If you start to look at [Nutmeg’s] financials, their accounts historically have shown that their cost base has been growing and the losses have been growing and they have been getting further away from profitability but clearly JPMorgan didn’t really worry about that.
“[JPMorgan] can perhaps be a little bit more accommodating of kind of short term losses as they start to build up scale. “
Ricky Chan, chartered financial planner at IFS Wealth & Pensions added it would be worth keeping tabs on how JPMorgan Chase develops the platform.
“Nutmeg has been around in the UK for around a decade and continued to make big losses – it’ll be interesting to see how JPMorgan can turn it around with their proposed challenger bank launch. This may be to target the 'millennial' clients of the future and secure a foothold in the UK.”
So what’s in it for JPMorgan Chase?
Holly Mackay, chief executive of Boring Money, said this was a trend she has been seeing with US banks.
“With Goldman Sachs reportedly launching a robo-adviser in the UK next year under the successful Marcus brand, there is an interesting push from US banks with strong wealth management arms into UK territory," she said.
“Clearly JPMorgan Chase will offer both a solid brand and, based on reports, a broader suite of digital banking products which should reduce average acquisition costs.
"JPMorgan currently provide some of the Nutmeg portfolios – it feels inevitable that they will shortly move to offer all investment management portfolios as soon as contractually permissible."
She added: “In my experience, deals are often all about timing. If JPMorgan Chase want to launch a digital bank here, acquiring a local business is about so much more than simply buying the robo itself.
"They are buying a team, local knowledge, speed to market, a distribution platform and more. I think an acquisition of this sort is the most logical conclusion for the larger UK robo-advisers, although of course everything always comes down to price in the ‘build or buy’ debate.”
Barrett added: “There's an opportunity to kind of cross-sell into other products, as well as subsidise [Nutmeg].
Heather Hopkins, managing director and founder at NextWealth, agreed that Nutmeg could expand further.
“Robo advisers have struggled to gain clients but Nutmeg has built a client brand and with further investment from JPMorgan, it may be able to grow and thrive,” she said.
“Nutmeg has recently started to hire financial advisers who can support converting clients from inquiry to action. Anything that gives more consumers access to advice is good news.”
Most commentators agreed that the short-term impact on the wider advice landscape would be negligible.
“The type of clients who invest with Nutmeg have case sizes a long way away from the type of clients which financial advisers look to be serving.
“It is a totally different segment of customers.”
Chan agreed, adding: “I don't think it would affect advisers much in the short-term as the demographics and clients using so called robo-advisers are different to those of advisers.
"We may begin to see more M&A in this space," he added.
“It’s a very competitive and crowded market, and I expect that we’ll see further acquisitions moving forward as more loss-making robo-advisers exit the industry.”
sally.hickey@ft.com
