Last week, robo-adviser Moola announced that it will close its business at the end of February. Its closure signals the closure of yet another robo-adviser.

In May 2018, investment firm Investec announced it was closing ‘Click and Invest’ – its robo-advice business after two years of losses. Is this the beginning of the end for robo-advice? What is going wrong for this burgeoning sector?

Rob0-adviser Moola, set up by fintech entrepreneur and consumer expert Gemma Godfrey, was meant to be a “simple way to grow your money” and “a low cost, simple to understand easy to access investment service” but on January 14 it issued the following statement: “After a recent strategic review, we have regretfully decided to close Moola with effect from 27 February 2020. Any monthly payments will stop being collected from 17 January 2020.”

This robo-adviser and others like it may have failed due to their inability to make a profit amongst other issues.

Tom Ellis, editor of Professional Adviser said last year: “Since the dawn of the robo-advisers, they have collectively lost more than £114m. An astonishing sum in itself, it does not include the money spent by UBS on its proposition, nor the money spent by Standard Life Aberdeen’s advice arm 1825 or NatWest, or indeed some of the smaller, organic firms that do not post profit/loss accounts at Companies House.”

No surprise

“Since the dawn of the robo-advisers, they have collectively lost more than £114m. An astonishing sum in itself, it does not include the money spent by UBS on its proposition, nor the money spent by Standard Life Aberdeen’s advice arm 1825 or NatWest, or indeed some of the smaller, organic firms that do not post profit/loss accounts at Companies House.”

NextWealth director Heather Hopkins said of the Moola closure in publication Money Marketing: “I am not surprised to hear that Moola has closed. While these decisions are always hard for the individuals involved, robo advice relies on selling products cheaply and I see no evidence that this fills a gap in the market.

“Financial advisers supported by efficient and powerful tech is a far better solution to offering advice to people who need it. The focus on innovation in recent times has been on replacing the human adviser. But the interaction with the human has proved to be effective both in converting savers to inventors and in gaining a full understanding of people’s money goals.

“I am a firm believer that tech enabled advice is the future. I think we are on the cusp of a flurry of innovation to support financial advice businesses.

“I hasten to add that Moola not only innovated on the mechanism of the delivery of advice but also in the way it spoke to customers. I hope as an industry we learn the lessons of success and failure of this business.”