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Profile: Nutmeg - 'we don't want to become an advice giant'

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Profile: Nutmeg - 'we don't want to become an advice giant'

Fresh from the launch of Nutmeg’s face-to-face advice service last month, head of financial advice Lisa Caplan is keen to dispel the notion that Nutmeg is planning to become a traditional adviser.

‘We are a digital business ultimately. How I see advice developing is if people want it, it’s there. We can support people but essentially we are a digital business — and that’s what Nutmeg does really well.

‘It [the face-to-face advice] is not going to take over the digital part of the business, but the route to that will be a bit different for some people,’ she adds.

The service offers an initial conversation free of charge, followed by a one-on-one review with a professional adviser and tailored financial advice, with personal recommendations costing £350 (including VAT).

Although Nutmeg manages money for 60,000 clients and has £1.5 billion in assets under management, it is under pressure to attract more clients in order to become profitable. Nutmeg’s losses rose to £12.4 million in 2017 — even though revenues increased by 76.9% to £4.6 million. At the time, the company blamed rising regulatory costs and continued investment in the business.

Caplan hopes the launch of the face-to-face advice service will attract new clients.

’We do a lot of research and we talk to customers who have started but not finished the journey. We say to them “what would help you?”. They say they like our current onboarding, but they just want to talk to a human to check they are doing the right thing.’

While the advice service is at a pilot stage, feedback so far has been positive. Caplan says that more than 300 people, largely existing clients, have already signed up and expressed an interest in receiving advice.

‘I’m happy with those numbers. To be honest, I didn’t know what to expect,’ she says.

However, Caplan believes the real potential of the new proposition lies in its ability to attract new customers to Nutmeg.

‘For me, the opportunity is with people who aren’t already customers. People who are customers have demonstrated that they are comfortable and happy to use our process.’

We can reduce the cost through technology because technology is what we’re good at, so we can give people advice at a reasonable price point.

She also hopes that the face-to-face advice service can help clients who are daunted by the online onboarding process.

‘I’m more interested in the people who don’t have the confidence, who feel that they need some advice. I’m going to be the person who has that initial conversation and then says: “You can do this online, it’s fine, go and try it”. But if people say, “no actually I do want someone to take a look at what I’ve done online”, I’m happy to do that.’

Caplan points out that the new advice service is not intended to operate separately from the online offering. In fact, one of the key objectives is to incorporate what she learns from the face-to-face meetings into the digital onboarding process.

‘We want to understand all customers better so we can respond to them better. So this is a way for us to understand what their advice needs are. It might be that we can address them without a one-to-one consultation, and can address their advice needs completely digitally.’

The £350 advice fee is by no means a princely sum in comparison to what individuals pay for traditional advice. However, Nutmeg’s substantial losses has caused some to question whether the advice revenues will cover the costs of offering the service.

 ‘As you can imagine there is a lot of debate around that [the £350 figure]. We did customer research, but also the regulations state that you have to charge enough to cover your costs,’ says Caplan.

 ‘A lot of people don’t want to pay for advice at all and I would like to offer it to them for free, but I can’t. Those are the rules and we are playing by the rules.’

Caplan tested the concept at different price points, but found that when the price was too low clients lost faith in the quality of the advice.

Cost appears to have been front of mind for Caplan when she developed Nutmeg’s advice service. During her time at Towry, she saw first-hand that there are high barriers to entry in the world of financial advice. The costs involved with providing wealth management services caused Towry to focus on those with larger sums.

‘Traditional wealth managers want you to have quite a lot of money before they will pay you attention,’ says Caplan.

‘I understand in a business model that is absolutely true, they are not being mean, they are just being a business.’

However, Caplan takes issue with the fact that traditional wealth management businesses are shutting the door on the growing number of people who require financial advice; this is where Nutmeg’s new advice proposition can play a role.

‘We can reduce the cost through technology because technology is what we’re good at, so we can give people advice at a reasonable price point,’ she notes.

Lots of people think that financial advice is only for the rich. I want to destroy that idea, because it’s not true.

Looking ahead, Caplan notes that Nutmeg will need to hire more advisers. Currently, the team comprises of Caplan, adviser Tom Kieldsen and paraplanner Sarah Crouch.

‘I don’t want it to become some huge advice thing with a digital investment manager on the side. I don’t think that’s desirable, but I do anticipate having to hire more advisers,’ she says.

Caplan does not place full blame for the advice gap squarely on the shoulders of the wealth management industry. 

‘There is also a demand-side equation as well; lots of people think that financial advice is only for the rich. I want to destroy that idea, because it’s not true. It’s actually the people that have less, not the high net worths, who need help so they can make the most of what they have.’

This was a problem that Caplan was grappling with a few years ago. The solution came to her while she was waiting for a train at Kings Cross Station and spotted a billboard.

‘They [Nutmeg] had a big display, and I recognised what it was. It was a new world,’ Caplan recalls. 

Although, she was impressed with Nutmeg and saw its potential, her decision to leave Towry to join the digital wealth manager was not without its challenges.

‘It was hard to leave my clients. That was a wrench because I wanted to see them follow through with the plans we made together,’ she says.

It was also difficult to leave a company that had offered her so much. She was one of the first in a cohort of four women in Towry’s return to work scheme in 2007 and spent the next seven years working as a wealth adviser for the business.

Caplan found her calling in the world of financial services later than most, having worked in marketing for the likes of Unilever for most of her early working life.

Following a career break after having children, she contacted an organisation called People Like Us, which specialises in putting women back in the work place. This put her through a barrage of psychometric tests which all pointed to financial advice.

'Advice is incredibly personal, it is a skill to get people to tell you about their finances and I was good at it. I'd be up to my eyeballs in people’s finances if I could and I don't see why it should only be the wealthy who have access to it,' she concludes.

With the advice service open to all of Nutmeg's 60,000 clients and the potential to attract new clients into the fold, the world is her oyster.  

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