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By Steve Slater
LONDON, June 12 (Reuters) - The flow of clients moving toonline wealth management services from traditional banks couldincrease sharply as wealthy clients focus more on low fees andwarm to online advice, the co-founder and CEO of Britishstart-up Nutmeg said.
"We want you to feel like you're walking into Goldman Sachswith 10 million, even if you're logging on to Nutmeg with 1,000pounds to invest," Nick Hungerford said at the Reuters WealthManagement Summit.
Nutmeg, founded in 2012, has 50,000 users and is one of abatch of firms sometimes dubbed "robo-advisers" threatening toshake up an industry long dominated by banks such as UBS, Credit Suisse and Bank of America.
"I don't need to destroy one of them, I can just take 10percent business off all of them," Hungerford said. "There aresome fundamental differences between us and the old world and atthe core of it is, whose money is it?"
He is not alone in thinking the industry is ripe forupheaval.
More than $4.7 trillion of revenues from traditionalfinancial firms is at risk from online companies offering wealthmanagement, loans, crowdfunding and payment products, and about$660 billion of that could migrate to the online innovators,analysts at Goldman Sachs said in a report in March.
Online wealth advisers say the appeal of private bankersoffering costly face-to-face advice is fading and clientsincreasingly want convenient, simple online platforms andtransparent, low fees.
Nutmeg charges an annual fee of between 0.3 percent and 1percent depending on the size of investment, below typicalwealth management fees. "Seeing them (banks) move from 1.35percent to 0.25 percent is unimaginable," Hungerford said.
HIGH EARNERS
The prime target for online wealth advisers are younger,wealthy individuals, dubbed HENRYs, or high earning, not richyet, who are underserved by banks or are happy to sidestep them.
"We're going to capture everyone before they become wealthyenough to be customers of these guys," said Hungerford at theSummit, held at the Reuters office in London.
Hungerford, 34, worked at Barclays before studyingat Stanford University in California, where he developed theidea of an online wealth advisor, encouraged by one of hisprofessors, Google Chairman Eric Schmidt. Nutmeg wasnamed after the once costly spice now available to everyone.
Nutmeg invests in a diversified portfolio tailored to clientgoals, such as for a pension, child's education or a wedding. Itsaid its investment team monitors and rebalances portfolios andrecommends clients use it for the "boring" or safe 80 percent ofportfolios.
Hungerford said clients can meet Nutmeg's advisorsface-to-face, but to date only nine had done so. He declined tosay how many of its users had invested, or what its assets undermanagement were.
U.S. robo-adviser Wealthfront, founded in 2008, has $2.4billion in assets under management, a sum dwarfed by banks. UBS for instance manages $2 trillion.
Nutmeg is loss-making but should be profitable in two tothree years, Hungerford said.
Other online wealth advisors are emerging, such as Quirionin Germany, and Hungerford expects more competition in Britain,which should help drive growth across the sector.
Nutmeg has 70 staff and has raised $50 million in funding.Its backers include venture capital firms Balderton and PentechVentures and asset manager Schroders, as well asindividuals Tim Draper, a U.S. venture capital investor, andCharles Dunstone, co-founder of Carphone Warehouse.
Hungerford declined comment on whether any banks had triedto buy the business. "Our investors don't need the cash, so theyare very committed to a long journey and hopefully a verysuccessful financial one," he said.
(For more Summit stories, see ) (Editing by David Holmes)
