- JPMorgan is acquiring Nutmeg, a UK digital wealth manager with some £3.5 billion in assets.
- The bank’s own robo-advisor and self-directed investing products manage $55 billion in assets.
- The competition to capture clients while they are new to accumulating wealth is fierce.
- See more stories on Insider’s business page.
This story was first published on June 15 and updated to reflect the bank’s acquisition of robo-advisor Nutmeg.
JPMorgan manages $55 billion in assets for customers using its online investing tools, each launched in the last three years to rival robo-advisors that had been on the scene for nearly a decade. It’s still a work in progress.
“We don’t even think it’s a very good product yet,” Chief Executive Jamie Dimon said during a conference hosted by Morgan Stanley on June 14. “So we’re driving that thing.”
“We think we have a huge competitive advantage,” because the bank already offers a range of digital banking products for clients, he added. “I’d point out over and over, that competition is way beyond anything the banks have seen in the last 50, 75 years.”
Online investing assets under management are separated into two products: self-invested assets (like choosing from a menu of ETFs, stocks, and other securities) and those through automated investing, or the robo-advisor. A spokesperson declined to specify a breakdown of assets between the two, but said the “grand majority is self-directed.”
The robo-advisor, launched as You Invest Portfolios in 2019 and rebranded as JPMorgan Automated Investing this year, is part of the bank’s aggressive push to grow its wealth management offerings beyond the ultra-rich. Its self-directed trading platform launched in 2018.
The bank has made clear it’s looking to ramp up the way it reaches clients with wealth management offerings, using the existing customers it has as the largest US bank to its advantage.
Three days after Dimon made those comments, the bank said it would acquire the UK robo-advisor Nutmeg, which oversees some £3.5 billion in assets, or $4.9 billion, for around 140,000 investors. The 9-year-old startup already used portfolios with active and passively managed exchange-traded funds provided by JPMorgan Asset Management.
JPMorgan, as well as rival banks Wells Fargo, Goldman Sachs, Morgan Stanley, Citi, and Bank of America, all launched similar automated investing products nearly a decade after robo-advisor pioneers Wealthfront and Betterment came onto the scene.
Betterment and Wealthfront manage $29 billion and $25 billion in assets as of April, respectively. Still, JPMorgan’s online investing assets under management are not entirely comparable to Wealthfront’s and Betterment’s, since they don’t offer self-directed business. Vanguard’s is the largest robo-advisor of the bunch, with $212 billion in assets under management through the end of 2020, according to data from research firm Backend Benchmarking.
Virtually every major US bank has set out to significantly grow its presence in the predictable wealth management business. They also see easy-to-use features like robo-advisors as a way to bring in customers newer to investing who could eventually work with a financial advisor — something far more lucrative for the banks.
The competition for talent and customers’ deposits alike has become particularly fierce in the last two years.
In late 2019 JPMorgan reorganized its US wealth business with former marketing chief Kristin Lemkau at the helm to better compete with bigger players in the wealth space. The unit has some $580 billion in assets under supervision, versus larger wealth managers like Morgan Stanley’s $4.2 trillion and Merrill Lynch’s $2.9 trillion in assets.
The robo-advisor sits under the same umbrella as the wider JPMorgan Wealth Management business. The product requires a minimum balance of $250 and charges an annual advisory fee of 0.35% on assets.
Other executives’ recent comments point to more investment in its automated investing tools.
On June 3, Chief Operating Officer Gordon Smith said there is a lot of work underway on such products, and that the team overseeing them has “laid out a really nice product road map that I think will help us to compete really successfully in that space.”
The robo-advisor is “growing well, but we can do much more with that,” Smith said during an industry conference held by Bernstein, according to a transcript of the event via Sentieo. He pointed specifically to progress on mobile personal financial planning features, an area “we are behind on and we are catching up quickly.”
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