Investec became the second asset manager in less than a year to shut down its online robo-advisory investment service after admitting appetite was too ‘weak’, setting aside more than £ 20million of operating losses and software costs.
The London-listed group said it had decided to ‘end’ Click and Invest, the lower-cost digital service it launched two years ago in an attempt to appeal to clients with smaller portfolios. . He warned that “the appetite for investment services like ours remains low and the market itself is growing at a much slower rate than expected.” The move follows UBS’s decision to shut down its own automated online service in August last year – also just two years after its launch – after the Swiss bank acknowledged that the “short-term potential” of the system, designed to attract young investors to the bank, was “limited”.
In its annual results Thursday, Investec said it had shut down its online service to “manage costs and efficiently manage capital.” The company revealed that Click and Invest recorded operating losses of £ 12.8million in its most recent financial year, up from £ 13.5million the previous year, as well as a write-off of 6 million pounds related to software. “The group remains committed to developing its digital initiatives and will seek to integrate technology into its offering,” he said. Click and Invest was designed to attract clients with less to spend on financial advice than their traditional clients.
But it tended to be more expensive than competing robo-advisory services like Nutmeg due to the fact that it used actively managed funds instead of cheap passive funds. In January, Investec reduced its minimum investment amount for the new service to £ 2,500 from £ 10,000 in an effort to attract more investors amid sluggish demand. Mike Barrett, Managing Director of The Lang Cat Consulting Firm said, “Few people have this specific need.” Robo-advisers such as Nutmeg have struggled to generate profit even from large client bases due to the tighter margins on these services compared to traditional financial advice, and have also found that some clients are unwilling to go digital.
Nutmeg and Scalable Capital have launched face-to-face and phone consultations with financial advisors over the past two years after realizing that many clients want a human touch. Charlotte Ransom, Managing Director of Netwealth, a service that offers both online wealth management and face-to-face advice, said: “Wealth management holders should focus less on chasing the market. distribution through unproven models such as ‘robotic consulting’ and instead direct their attention to better serve their current customers.
“It starts with providing a service that both retains the human elements and encompasses the extraordinary benefits of today’s technology.” Investec clients will now have to move their investments elsewhere over the next 90 days by selling them and withdrawing money in cash or transferring them to another provider. On Thursday, Investec also announced that the planned split of its asset management business is scheduled for the second half of this year. He had initially hoped to finalize the deal before the summer.
Source: Financial Times – Kate beioley