The case for robo-advice: it’s time to upgrade to digital wealth management

Shaun Port


3 min read

Money Observer recently asked our chief investment officer, Shaun Port, to make the case for why you don’t need a traditional wealth manager. Here are his thoughts on why it’s time to upgrade to digital.

Wall-e robot on street holding leaf

Traditional wealth managers provide an important service to a small segment of the UK’s population. They deliver quality advice to help with complex financial problems. But for the vast majority of people, a traditional wealth manager is simply not accessible, affordable or necessary.

While there is a debate over what the typical minimum portfolio size for a wealth manager actually is, there’s no doubt that investors need increasingly large sums of money (typically in the six-figure region) to access a quality wealth service.

Democratising wealth management

Let’s be clear: the reality is that the traditional wealth management services have not been available to people with lower amounts to invest because the financial industry does not see any profit in smaller investors.

New technology is helping us to meet this need, enabling businesses like ours to offer a high-quality service to people with just £500 to invest, not just those with more than £500,000. We’re on a mission to democratise wealth management.

But making this service available to everybody is only part of our business. We believe that wealth management is in desperate need of an upgrade. We call it ‘digital wealth management’.

Cheaper charges and transparency

First off, I will deal with fees. Go to the website of your wealth manager of choice – can you find out about all the fees you will be charged? Hiding behind the mantra that ‘every client is unique’ is not a good enough excuse not to publish charges openly.

But even when you are a client, finding out what you have actually paid out in total over the past year in pounds and pence is incredibly difficult to do.

We put transparency at the heart of our service – at any time you can log in and see how much you have paid in real money.

For example, if you invest £250,000 in a fully managed portfolio, your annual fee will be 0.75% on your first £100k and 0.35% on the rest – about one-third that of a typical wealth manager. And we know that fees have a dramatic difference on long-term performance.

Passive approach

Another subject related to fees is the use of passive funds. The investment industry wholeheartedly believes that asset allocation is the key long-term driver of returns, and yet most wealth managers promote their ability to choose active managers that will beat the market.

Research by S&P shows that this is unlikely. Of the US equity funds that were in the top quartile in the three years to March 2013, only 17% were still in the top quartile three years later.

Using passive instead of active funds should not be the wealth management industry’s embarrassing secret, or a sign of ‘giving up’. Passive funds, especially exchange traded funds, are powerful tools able to deliver strong long-term returns when used well.

There’s a human touch – we’re not robots

It’s not just about low fees and highly efficient portfolios, though. We offer a high-quality online service. Our investment team – humans, not robots – manages portfolios day in, day out.

And while we make it super easy for our customers to self-serve – to get timely information, to add new goals, to top up their portfolio, to transfer their pension to use without filling in any paperwork – we still love to talk to our customers on chat, by email and yes, by telephone.

This is why tens of thousands of customers across all age brackets trust us with their money, and why you too don’t need a traditional wealth manager; it’s time to upgrade to digital.

[First published by Money Observer, 12 January 2017]

Risk warning: As with all investing, your capital is at risk. The value of your portfolio with Nutmeg can go down as well as up and you may get back less than you invest. Past or future performance indicators are not a reliable indicator of future performance.

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Shaun Port

Shaun Port

Shaun is the chief investment officer at Nutmeg. He has over 25 years’ experience developing and implementing investment strategies for clients ranging from central banks to pension schemes to charities and private individuals. Shaun holds a degree in Mathematical Economics from the University of Birmingham and is a Chartered Alternative Investment Analyst. He can be found tweeting @ShaunPort.


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