The face of the UK digital advice space is changing, with the latest piece of action coming from JPMorgan Chase, which is set to buy robo-adviser Nutmeg.
The popularity of platforms like Nutmeg was highlighted in a study by GlobalData last year, which found that although robo-advice holds a relatively small market share in the UK – with just 3.4 per cent of retail investors preferring to use this channel to arrange investments – its growth has been substantial, and in an increasingly digital-centric world this trend will only continue.
Following the acquisition, Nutmeg is intended to complement the company's new digital bank, which is planned to launch in the UK later this year under the brand of its US retail offering JPMorgan Chase.
So what is in this deal for JPMorgan and Nutmeg?
JP Morgan has said Nutmeg's customers and the products and services they use will be unaffected. Meanwhile, over a period of time, JP Morgan will work with with Nutmeg to integrate products and teams.
Nutmeg chief executive Neil Alexander also stressed that its customers can continue to expect the same level of transparency and convenience.
Simon Bussy, director of wealth at Altus Consulting, says following the acquisition there will be "sighs of relief" and "big smiles" in Nutmeg.
“A sigh of relief that their future is now secure and the focus, at least for a while, will move on from the ‘they’re not making any money, they’re destined to go the same way as all the others, anyone can run a business at a loss’ type comments that have filled the trade press," Bussy adds.
“Big smiles that they will, in time, be part of a proposition much bigger, much better, than anything they could have achieved on their own, and will have the serious investment backing to help accelerate their own plans.”
For a business like Nutmeg to have success with a direct-to-consumer proposition it needs to build a trusted reputation or brand, achieve scale and a good reach, all of which need to be done with deep marketing pockets.
The marketing ‘burn rate’ to acquire customers at Nutmeg has been well reported, but its number of customers continues to grow – latest figures stand at 140,000 – while it manages assets of around £3.5bn.
For JPMorgan, the purchase provides a ready-made investment solution to complement its planned retail banking operation for the UK to be rolled out later this year.
It has not taken years in the making for JPMorgan to acquire this number of customers: there have been no aborted projects and no going through the early growing pains that Nutmeg and every other digital service has to go through, to survive.
