£350 for your thoughts: Nutmeg enters financial advice market with budget offering
Online wealth manager Nutmeg revealed plans today to shake up the financial advice market with a low price fixed-fee model.
The advice service, which will be provided over the phone, will offer a free initial consultation, followed by a £350 charge should the customer want recommendations.
The move is a shift away from the common so-called per cent fee model, and is considerably cheaper than the £1,000 to £4,000 annual advice fee that Nutmeg claims is charged by traditional independent financial advisers (IFAs).
Lisa Caplan, head of financial advice at Nutmeg, said: “The scarcity of financial advisers, prohibitive costs and an industry happy to neglect swathes of the population, means many people are faced with making big financial decisions on their own.
“Too few people know what sort of financial advice is available, how it could help them or where to find it. We want to change that and make financial advice accessible to more people.”
Justin Modray, director of Candid Financial Advice, a low cost financial advice service, welcomed the news, saying financial advice is still too expensive.
“Too many people still pay far too much for financial advice, so it’s great to see Nutmeg trying to break the mould," he told City PM
"I really hope we also see more traditional advisers opting to slash charges and work remotely, as investors deserve a fairer deal.”
However, other IFAs said the service would not be comparable to the quality of advice they offer.
Martin Bamford, a chartered financial planner and fellow of the Personal Finance Society, told City PM: “Financial planners provide an incredibly valuable service that is unrecognisable from the low-budget telephone consultancy approach being offered by Nutmeg."
“But financial advisers should respond to changing investor demand," he added.
“As an investor, I would be nervous about taking advice from a habitually loss-making firm. The adviser-client relationship is long-term and there is no guarantee that a business which lost a whopping £12.4m last year will be around to provide ongoing advice in the future.”
A spokesperson from Nutmeg defended its financial position, saying: “Our eyes are not on short term profit, rather on building a long-term business that truly works in the interest of consumers and we’re on track versus our business plan.”
“It’s not unusual for VC-backed businesses to make losses in the initial years, Amazon is the often-cited example – and look at them now!”
Nutmeg’s 2017 annual results, published earlier this month, showed revenue up 79 per cent to £4.6m.
However, its £12.4m operating loss was up 32 per cent on a £9.4m operating loss in 2016, in part due to regulatory changes such as the Markets in Financial Instruments Directive (Mifid) II regulation.
Customers do not need to have investments managed by Nutmeg investors to use the advice service, which opens today.