Online advisers battle to win high-net-worth clients

Online advice providers are grappling with how to attract and retain high-net-worth clients.

Average investment sizes with online advice services are at low levels. Money on Toast says its average investment is £12,000, while Wealth Horizon’s is £17,000.

Money on Toast recently revealed plans for a new service targeted at people with more than £250,000 to invest that will offer a combination of online advice and virtual meetings with advisers.

Investment platform Nutmeg has also announced plans to enter the advice market.

Some experts say online services will gradually attract more high net worth customers as clients get used to the technology and the process becomes more sophisticated. But others caution firms risk losing clients to face-to-face advice servi-ces as their clients’ wealth increases.

Investment Quorum chief executive Lee Robertson says: “It appears in the UK that very modest funds are being invested through online advice.

“Processing lots of clients with tiny pots is challenging administratively. At the same time, clients with larger assets have more complex needs and it is difficult to deliver advice to them cheaply and cleanly online.

“The online platforms seem to be recognising that, with Nutmeg already trying to build an advice arm having originally thought they could do it all without advice.”

EY senior adviser Malcolm Kerr adds: “As clients’ assets increase and life gets more complicated, they want to have conversations with advisers. I’m sure businesses like Nutmeg are thinking of ways to avoid losing clients to traditional advisers as they amass greater wealth.”

Finance & Technology Research Centre director Ian McKenna says it is early days for online advice propositions in the UK. “It is entirely logical that initial investors are putting in a little bit of their money and seeing how they find it.

“Over time, the sophistication of these systems and what they can do will increase, and as a result so will the likelihood of attracting clients with larger investment portfolios. In the US there are some examples of online advice firms attracting quite healthy average investment sizes.”

Online pension adviser Wealth Wizards, for instance, says it is looking at developing services targeted at more complex areas of advice, with part of the process automated.

Online advice firms argue clients of all wealth levels want choice in the way they access advice.

Wealth Horizon chief executive Chris Williams says: “We have a wide range of portfolio sizes and have already seen clients start with a smaller investment and top it up.

“I’m not a great fan of segmenting clients by their wallet size. Our service is for clients with fairly straightforward needs and it works just as well for someone investing £200,000 as for someone investing £1,000.

“We have a conversation with almost every single customer, and where we don’t offer the service they need we will refer them elsewhere.”

Money on Toast managing partner Charlie Nicholls says: “The reason our average investment size is £12,000 is mostly because our clients are using the online service for their Isa investments, not because this is all the money they have.

“Many have large holdings elsewhere and this is why we are launching our HNW service, so clients can use robo-services in some areas of their finances, and a combination of robo-services and virtual appointments in others.”

Nutmeg chief executive Nick Hungerford adds: “Wealthy investors are much more aware of the impact of costs on performance over the long term. The requirement for an efficient investment service at a fair price spans all wealth brackets.”