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

For a business that still makes multi-million pound losses, digital wealth manager Nutmeg sure does have a lot of fans in the investment community. Its latest plan to set up a £350 fixed-fee “advice” service to help low-value investors with their finances has surely won it a few more.

I, as someone who is not qualified to give “advice”, can’t have been alone in expressing occasional frustration about quite how staunchly “advisers” protect that term, seemingly intent on slating every loose instance where “advice” is used but does not, in fact, refer to the regulated kind offered by a fully-qualified adviser. (See calls to rebrand guidance bodies the Money “Advice” Service and The Pensions “Advisory” Service as examples).

But in instances like Nutmeg’s, the difference is more than a semantic one. If I went to an “accountant” for some “accountancy” services and paid them £350, I would expect them to do more than tell me which of their handful of in-house services was right for me depending on how complex my accounting needs were. I would probably expect them to do some actual “accountancy”.

Cover story: Can Nutmeg conquer advice?

Full-fat face-to-face advice is certainly not for everyone. But that’s not going to be solved by Nutmeg chunking people into its own ready-made portfolios for a fee, when they could just as easily do it themselves through an even lower-cost direct-to-consumer platform.

The public might not be left with the greatest impression of advice either. What if they come to Nutmeg and ask when and what they should take out of their pension? No dice. How should they leave money to their kids? Can’t help you. Do they need life insurance or income protection? Sorry, you’ll have to see someone else. Want to minimise your tax bill? Our “advice” is not for you.

That said, this may be the commercial shot in the arm Nutmeg needs. It makes the £350 fee off some very simple, very quick work, and then continues to take the fees when the money is invested in its own portfolios. It will then charge the same £350 again next year for anyone who wants to make sure that their portfolio is still suitable, or see if they should change to another (Nutmeg-run) one.

But that service shouldn’t really be called “advice”. At best, it will get people on the savings ladder without causing financial harm. At worst, it will be a return to the days of the tied product salesman that we all thought ended with the RDR.

Justin Cash is editor of Money Marketing. Follow him on Twitter @Justin_Cash_1

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  1. I suspect the reason for launching this advice light service is down to the FCA tightening up on how the robo-services akin to Nutmeg are satisfying the rules around suitability. In short, it’s difficult and recent comments from the FCA back this up.

    The rules were never designed with robo in mind and meeting the suitability requirements (along with the years of guidance around it) is proving difficult to do in a meaningful way. There is an opportunity for a change in the rules to make advice more widely available. However, the problem is they have to apply to traditional advisers too. And they have spent the last 10 years upping their game (and costs) at the behest of regulators and their ever increasing demands.

    The regulator has effectively backed itself into a corner. For competition reasons alone it cannot introduce lighter touch rules for robos alone. And politically it cannot loosen the suitability rules to include advisers having spent the last decade ramping them up.

    The real losers? Clients. Those who have paid through the nose for expensive advice and those who cannot afford to get it. Despite the grumping and occasional groan, the real winners have been advisers. Just don’t tell anyone!

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