Posted on February 4, 2020 by staff

Could robo-advisers self destruct?


A leading FinTech boss is predicting that so-called ‘robo-advisers’ face an uncertain future as customers move back towards wanting more human interaction.

Robo-advisers is the nickname given to online platforms that use algorithms to make decisions rather than traditional human advisers.

The leading name in the UK market is Nutmeg with other players including MoneyFarm and Wealthify.

Supporters of robo-advisers – also called online wealth managers – say they offer people a low-cost way to invest with the help of technology.

A number of robo-advisers have closed in recent years and Anthony Morrow, CEO of Manchester-based FinTech OpenMoney, predicted a tough time for the sector.

“The market for those robo-advisers that are simply an online stockbroker with a shiny interface look challenging with even the biggest player (Nutmeg) struggling to achieve not only profitability but also scale,” he said.

“We think the market is evolving to recognising that the majority of customers want broader financial advice and not less as some in the market predicted.

“With robo-advisers the customer goes online, picks the portfolio that best meets their needs and buys it. The robo-adviser then manages that portfolio for a fee. There will be someone who manages the money but you won’t speak to them and it’s geared around automation.”

The portfolio recommendations are based around a customer’s chosen risk profile and are calculated through algorithms.

Morrow said: “A lot of people are nervous about making decisions on their own. If the widely held consensus is that we have record low levels of financial numeracy and literacy should people be left to make those decisions on their own?”

The 45-year-old entrepreneur launched OpenMoney alongside co-founder Duncan Cameron in April 2017, when it was called evestor before it rebranded.

Aimed at savers and investors it combines technology and human advisers to make financial advice and investing accessible and affordable to everyone – whatever their age, wealth or experience.

Based in WeWorks at One St Peter’s Square, in Manchester, the company has grown to 55 staff and hit £1m turnover.

It now has 45,000 customers and Morrow predicts they’ll top 100,000 in 2020 as they’re growing at a rate of 1,500 new customers a week.

OpenMoney allows people to invest from as little as £1– but only if it’s right for them.

“By combining sophisticated technology with real people, we offer financial advice through our online platform, and offer tools to help people get out of their financial cycles through our OpenMoney app,” said Morrow.