Robo-advisors are no longer being ignored by the old guards as JPMorgan acquires Nutmeg, says GlobalData
Sergel Woldemichael, Wealth Management Analyst at GlobalData, a leading data and analytics company, offers his view...
“This is a strong strategic move given rising demand for automated investment services. JPMorgan Chase will be able to respond to changing demand patterns rapidly by bringing Nutmeg’s digital expertise in-house. The lion’s share* of UK wealth managers believe digital platforms created by start-ups provide a better experience than traditional players. In addition, 66%* of UK wealth managers agree that traditional players will continue losing market share to robo-advisors. JPMorgan Chase is addressing both threats by bringing Nutmeg under its wing.
“This acquisition will allow JPMorgan Chase to tap into the digitally savvy demographic that Nutmeg caters to. Yet, the JPMorgan brand is not necessarily well-known among the masses in the UK, so attracting such individuals via Nutmeg will be an obstacle to overcome. Indeed, this was a hurdle UBS could not clear, which saw the group close its UK robo-advice service just over a year after launch.
“This announcement could ruffle some feathers. Nutmeg’s customers who are standalone robo-advisor enthusiasts and old guard critics may turn their heads, as this acquisition empowers unwanted consolidation of the new school by the old school.
“Robo-advice holds a relatively small market share in the UK, with just 3.4%** of retail investors preferring to use this channel to arrange investments. However, its growth has been substantial, and in an increasingly digital-centric world this trend will only continue. It’s a clever move by JPMorgan Chase to snap up the UK robo-advice leader, but success will be determined by how well a brand largely associated with the elites can relate and cater to the digital-savvy (and keen to be wealthy) demographic from the masses to the mass affluent.”
*GlobalData’s 2020 Global Wealth Managers Survey
**GlobalData’s 2020 Banking & Payments Survey