Nick Hungerford, the Portag3 Ventures partner and Nutmeg cofounder, explains why to his mind consolidation in robo-advisory is inevitable.
It's inevitable that there will be consolidation in the robo-advice market. There are too many players and the cost of acquisition of customers is too high.
There are too many robo-advisors in the market at the moment. In the UK for example, it's inevitable that there will be consolidation.
The reality is that the cost of acquisition of customers is too expensive to support this number of companies.
Make no mistake, incumbents still have the upper hand—there's a reason that new banks are called challenger banks, and a reason that wealthtechs are often called upstarts. However, the window of advantage is definitely shortening. Whether you're an incumbent company, or whether you're a new technology company; it's about understanding where we fit into the value chain, both as creators of product, but also creators of service.
Across Fintech, you've seen this amazing evolution of people raising money from venture capitalists, until they get to a certain size, and then raising money from established financial services brands.
And I think that's a perfect demonstration of a great strategy from both the technology company and the established financial services company. Because at that time, you're combining the best of both: you're giving the technology company the power of the established company's brand, you're giving the financial services company an inside a look into how this technology company runs, and both are giving each other what the other one needs.
Nick is a banker turned entrepreneur and investor who's passionate about improving the availability and usability of financial products and services. He was cofounder and director of Nutmeg, and is now a Senior Partner at Portag3 Ventures.