IFAs shun robo-advice plans over profitability concerns

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IFAs are put off launching robo-advice services by fears they will not turn a profit in the long run, according to discretionary fund manager Thesis Asset Management.

Over the past year Thesis has consulted with a number of IFA firms on building digital advice offerings but some remain sceptical on how this could turn into a profitable business.

Thesis director of marketing and business development Laurence Cook says it has been advising Tom French & Associates, an 18-strong adviser firm.

The firm has abandoned initial plans to white-label a robo-advice proposition with the DFM. It has opted for a Thesis-led digital marketing strategy instead.

Cook says firms have been put off by seeing big names struggle to make profits.

He says: “They’ve already seen with the likes of Nutmeg that, despite their website looking very good, they’re struggling to turn huge amounts of investments into profits.”

“So why would a very small firm [build a robo-advice offering]? How would they do something different?”

Cook adds: “Monetising a digital offering…You’ve got to be particularly careful going into that.

“They thought about a robo solution to capture younger people but in the end they changed their minds.The proposition they wanted to deliver is personal advice. What they really wanted is to capture younger people so they didn’t want to deliver advice digitally.”