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Nic Cicutti: Nutmeg’s new advice service is taking consumers for a ride

Gullible punters asked to pay £350 because Nutmeg can’t attract enough to online investment service

A few months ago, I was asked to write a piece for a consumer finance magazine which looked at how to invest £100,000 if you wanted to go it alone. As well as detailing the role of independent financial advice, I explored a few robo options.

I must confess to being hugely impressed by some of them – in particular, Nutmeg.

I liked the ease and simplicity with which someone not totally savvy about money could make valid decisions about their investments in a matter of minutes.

The Nutmeg process allows you to choose a goal, whether that be retirement, buying a house, saving for a child or just to build a rainy-day fund.

You decide how long you want to invest for, the risk level you feel comfortable with and the investment style you prefer – a cheaper fixed fund allocation or a managed and regularly balanced portfolio.

Can Nutmeg conquer advice?

Nutmeg will project potential gains and charges after 12 months and for the overall investment term. In my personal example, within two minutes, the managed investment approach I chose and which – based on the questions I answered – had ranked me as a medium-to-high risk, was able to offer me portfolio choices and project potential performance outcomes, as well as the level of charges I might expect to pay for my chosen investment timeframe.

If I had wanted to start investing, I could have placed my money in an Isa within another five minutes. What I also liked was Nutmeg’s focus on ETFs – a great way to deliver broad market access at low cost.

Before I wrote my piece, I asked my two nephews, both in their 20s, to play about with a few robo sites and give me their verdicts.

They liked all of them and raved about Nutmeg, in particular, as I wrote about in Money Marketing at the time.

So why is it that, if I like its overall simplicity and ease of use, its low charges and relative transparency in terms of investment decisions, do I feel so uncomfortable about Nutmeg’s recently-launched advice offering?

Nutmeg will be offering “tailored financial advice” to customers, for which it will charge £350.

Editor’s note: Why Nutmeg’s ‘advice’ offering isn’t really ‘advice’ at all

But the advice service on offer sounds to me like a verbal version of the existing online service. So, anyone who goes down that route would be expected to pay £350 for the privilege of talking to someone who will simply tell them the same things as the website already does.

What I also dislike is the way it will only advise you on which Nutmeg portfolio is suitable for you.

That sounds to me like an online version of SJP’s segregated mandates, basically its own in-house funds, with all the implications in terms of lack of choice and conflicts of interest that apply there.

Yes, it is cheaper, and I fully appreciate Nutmeg is very clear this is restricted, not independent, advice. It does not pretend to be what it is not.

Even so, Money Marketing editor Justin Cash is right to say this is not anything like a proper definition of advice. To me, advice is about addressing the complex decisions faced by consumers when thinking about their finances in highly personal contexts that include issues such as taxes, divorce and death.

That kind of advice, which is what people really need, will easily cost several times that amount. For all its potential expense, it is extremely valuable and important.

Yet Nutmeg is offering none of that. It is simply telling you, on the basis of an automated written report, what its website can do just as easily for nothing.

Personally, I would rather pay three or four times more than the £350 fee to receive something that is genuinely useful.

Nic Cicutti: Why can’t advisers get it right with millennials?

In one of the many online comments below Money Marketing’s story on Nutmeg’s new venture, communications and marketing supremo Lucian Camp points out the whole exercise is more likely to have been determined by its need to “introduce a person-to-person conversation into its customer acquisition process”.

By having live human beings talking to potential customers, the impact would be both to reduce Nutmeg’s “drop-off” rate and also, ideally, to increase the average sum invested from its current level of about £28,000.

Camp reminds us that when John Charcol first launched its online mortgage service in the late 1990s, no one was completing the application process.

But among those who were persuaded to switch to its tried and tested telephone service, the completion rate was 50 per cent.

I think he is right. In which case, what Nutmeg is doing is asking gullible punters to pay at least £350 for the fact it cannot attract enough of them to use its online investment service.

If that is “tailored advice”, I reckon Nutmeg is measuring up its would-be clients for outsized clown suits.

Nic Cicutti can be contacted at nic@inspiredmoney.co.uk

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Comments

There are 4 comments at the moment, we would love to hear your opinion too.

  1. Unfortunately there is a great deal of on-line offerings that treat the users as mugs. Nutmeg is in the company of Facebook, Instagram, Twitter and a whole host of others.

  2. Nic ….you may want to be a little bit more partisan …..
    Ask yourself were this £350 is going, now nutmeg are straying into advice ?

    The cost of standing still by adding a service proposition?

  3. Perhaps if Nutmeg and all the other robos could begin with dropping ‘financial’ for ‘investment’ advice.

    The terms are often used interchangeably and I would suspect very misleading.

    What about protection? Wills? Estate & IHT planning? Budgeting? Cash flow planning?

    The danger is that people assume financial advice begins and ends with investing. For providers without pension permissions they *only* offer investment guidance. Woefully inadequate.

    “Tailored financial advice” is absolutely not on offer here.

  4. I disagree with the view that the only version of advice should be holistic. Holistic advice is valuable to people who have complex affairs and have sufficient interest in acting on the advice received. But of course holistic advice takes many hours to deliver and requires skill and the ability to apply knowledge on a bespoke basis. Advisers rightly have to charge enough to cover their costs and make a profit for themselves as well as their clients. But this makes advice expensive for those without complex affairs. And so there is a space to meet the needs of people who want help and guidance making choices about how best to invest for specific goals. And not everyone feels confident to make their own choices. Nutmeg cannot tyrn a profit with the current service, which you and your children are very impressed with. So unless they start to find ways to make more money the service will not survive. If people want human intervention and to be reassured about their choices then £350 is a lot cheaper than the much higher amount they would pay for holistic advice which might be of no interest to them. I don’t understand why anyone other than holistic advisers think its a good thing that any form of advice than holistic planning is not available or useful. Good luck to nutmeg. They are offering human intervention as an option not a compulsion.

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