Online wealth advisers set for influx of clients
LONDON — The flow of clients moving to online wealth management services from traditional banks could increase sharply as wealthy clients focus more on low fees and warm to online advice, the co-founder and chief executive officer of British start-up Nutmeg said.
“We want you to feel like you’re walking into Goldman Sachs with £ 10 million, even if you’re logging on to Nutmeg with £1,000 to invest,” Nick Hungerford said at the Reuters Wealth Management Summit.
Nutmeg, founded in 2012, has 50,000 users and is one of a batch of firms sometimes dubbed “robo-advisers” threatening to shake up an industry long dominated by banks such as UBS, Credit Suisse and Bank of America.
“I don’t need to destroy one of them, I can just take 10% business off all of them,” Mr. Hungerford said. “There are some fundamental differences between us and the old world and at the core of it is, whose money is it?”
He is not alone in thinking the industry is ripe for upheaval.
More than $4.7 trillion of revenues from traditional financial firms is at risk from online companies offering wealth management, loans, crowdfunding and payment products, and about $660 billion of that could migrate to the online innovators, analysts at Goldman Sachs said in a report in March.
Online wealth advisers say the appeal of private bankers offering costly face-to-face advice is fading and clients increasingly want convenient, simple online platforms and transparent, low fees.
Nutmeg charges an annual fee of between 0.3% and 1% depending on the size of investment, below typical wealth management fees. “Seeing them ( banks) move from 1.35% to 0.25% is unimaginable,” Mr. Hungerford said.
HIGH EARNERS
The prime target for online wealth advisers are younger, wealthy individuals, dubbed HENRYs, or high earning, not rich yet, who are underserved by banks or are happy to sidestep them.
“We’re going to capture everyone before they become wealthy enough to be customers of these guys,” said Mr. Hungerford at the Summit, held at the Reuters office in London.
Mr. Hungerford, 34, worked at Barclays before studying at Stanford University in California, where he developed the idea of an online wealth advisor, encouraged by one of his professors, Google Chairman Eric Schmidt.