Online discretionary wealth managers, the so-called “robo-advisers”, have become an integral feature of the UK sector since Nutmeg first launched in 2011.
Probably no other type of firm active in the sector has generated as many column inches, conferences and discussions during that time. The ability of these new digital firms to disrupt and revolutionise wealth management has been hotly debated.
Traditional wealth managers are embracing the need to digitalise elements of their business. However, they seem to have largely dismissed the idea that the robots will take over.
In the 2018 PAM Digital Survey only 16.33 percent of respondents viewed robo-advisers as a direct threat. Over half, 57.14 percent, said they were no threat at all and a further 20.41 percent said they were a partial threat.
This is probably because of the belief that the wealthy and very wealthy clients served by the traditional firms have complex needs and want a more personalised and high touch service. This requires human interaction and building a personal relationship, or so the argument goes.
Proponents of robo-advisers could counter by highlighting the growth of some digital firms. The 2018 edition of the PAM Directory revealed that two, Nutmeg and Scalable Capital, were amongst the UK’s fastest growing wealth management companies in terms of client accounts and assets under management (AUM) in percentage terms.
Nutmeg also performed well in total client accounts growth. However, in total AUM growth no robo-adviser made the top ten tables. Nor did any enter the top 40 managers by AUM despite both Nutmeg and Scalable Capital entering the top 40 by client accounts.
As thewealthnet noted at the time, this seems to suggest robo-advisers are picking up smaller mandates. Unless they can ...