Nutmeg robo-advisor joins Starling Bank’s marketplace

More evidence that FX brokers should revisit the robo-advisory sector as Starling Bank onboards Nutmeg’s service

Two of the UK’s most prominent fintechs are coming together as digital bank Starling adds robo-adviser Nutmeg to its marketplace.

Starling customers will now be able to connect their personal and sole trade accounts to the investments or pension products that they hold on Nutmeg’s platform.

Starling’s marketplace aims to bring together financial products from different providers to offer a more fully rounded service to its customers.

This integration of Nutmeg products into the Starling platform will provide customers with a “full picture of their finances at their fingertips,” says Nutmeg chief operating officer, Matt Gattrell. “We know that helping people to have a clearer pictre of their financial circumstances is crucial and even more in front of mind at the moment,”

Those customers without a Nutmeg account will also be able to register one through Starling’s marketplace.

The digital wealth manager views the intgration as an opportunity to grow its client base, which currently numbers 100,000, through visibility in front of Starling’s customers which number over a million.

The question is, with the new wave of robo-advisory services being courted by both traditional banks and challenger banks, why did the FX industry look at this direction, then ditch it?

A few years ago, when some of the more astute FX brokerages were looking at how to engage clients that would ordinarily seek managed accounts with wealth managers – something they should certainly be doing once again – robo-advisors became a point of interest.

With the exception of some of the large multi-asset FX brokerages such as Swissquote or Interactive Brokers, the token interest soon went by the wayside and mention of rob0-advisory services gradually slipped from the agenda within most companies, with standard self-directed spot FX continuing to take precedence.

Perhaps this was a hasty decision, especially given that these days the need for multi-asset trading environments has increased tremendously, and the wealth management companies are looking at the OTC electronic trading sector as an aligned read-across, which gives FX brokers an excellent opportunity to do what they should have done years ago, that being go down the hedge fund and wealth management route.

Recently, another allusion to the need to look at robo-advisory service arose, as British bank TSB, formerly known as Trustee Savings Bank, a retail banking institution that had been part of the Lloyds Banking Group for many years, started a partnership last month with Wealthify – a British firm that has trendy advertisements all over London’s Underground train network, to offer robo investments to its retail banking clients.

TSB’s five million customers can follow a link within the TSB app or internet banking to start investing in a general account, investment ISA or Junior ISA via the robo-adviser.

They will have a choice of five investment approaches based on needs and risk, ranging from ‘cautious’ to ‘adventurous’, and users will also have the option to invest ethically, and can start from £1.

Revenue from a management fee of 0.60% will be split equally between Wealthify and TSB.

These partnerships between banks and robo advisory services are often conducted in the form of a classic revenue share model, something which FX brokers use all the time for absolutely everything, and is a ready made batch of UK based loyal customers who will easily be onboarded, and will not be likely to quit after a few months, and do not require armies of telesales people trying to call ‘leads’ and churn business in far flung and irrelevant banana republics.

This is the way forward, and it could easily have been an FX firm that had partnered with TSB. Wealthify has only been in existence for five minutes, yet IG Markets has been around for over 40 years, for example.

Banks and major investment houses are willing to work with these newcomers, as are venture capital investors.

The apathy among the FX business is the only aspect holding back approaching client bases such as this and elevating the entire intellectual property of retail brokerages. That needs to change.

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