Nubank Closes Its Investment Advisory Team and Lays Off About 40 Employees

Nubank Ends Its Investment Advisory Service and Dismisses 40 Employees. Layoffs Occur Due to High Interest Rates, Where Client Acquisition Becomes Complicated.

Nubank, one of the largest financial platforms in the world, serving over 70 million clients in Brazil, Colombia, and Mexico, decided to end its investment advisory team, which had been developed less than a year and a half ago. The team’s closure reportedly led to the dismissal of 40 employees, according to information, but the financial institution did not disclose any data.

Clients Criticize Nubank’s Financial Services

The layoffs of the investment advisory team employees come just weeks after an investment product from Nubank was heavily criticized by thousands of clients. This concerns the Nu Reserva Imediata, a fixed income fund marketed as an emergency savings option for those with at least R$ 1 to invest, but which suffered significant losses due to holding debt securities from Americanas in its portfolio.

The decision to close the investment advisory team, however, apparently had no connection to the criticisms of Nu Reserva Imediata, as the fund was available to all clients of the digital bank, while the advisory service was only offered to a portion of the clientele.

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The layoffs occur due to the high interest rate environment, which tends to make client acquisition by investment advisors a bit more challenging given the competition from low-risk fixed income options, such as Tesouro Direto. In a statement, Nubank claims that, like many other companies, it regularly makes adjustments based on business demands and client needs.

Nubank Hired More Than 2,000 Employees in 2022

According to Nubank’s statement, after a careful evaluation, the company decided to end the activities of the Investment Advisory service, which was available to a small fraction of clients.

In practice, clients continue to have their resources properly invested in chosen investments, having access to the Nubank and NuInvest apps, as well as their content platforms, where they can obtain vast material on financial education and investments.

Thus, the employees of this specific department were laid off. The company also highlights that its employee count increased from 6,000 to 8,000 in the past year, and, according to what has already been announced, the company continues to hire at the ideal pace for its business plans in 2023.

Nubank May Close 2022 with a Net Loss of US$ 26 Million

For analysts, the layoffs at Nubank indicate that the pilot was not successful, and the company will have to continue investing in growing its customer base to expand the volume under custody.

David Vélez’s bank, global CEO of Nubank, however, is not expected to give up on advancing to the top of the pyramid. The market expects new initiatives to be taken by the institution throughout this year, following the end of the investment advisory team.

BTG reflected in a report on the fintech’s success among low-income populations and the role of the bank in democratizing financial services in Brazil. However, to justify its US$ 22 billion market value and expand its addressable market, BTG believes it is essential to move up the financial pyramid, attracting higher-income clients.

BTG projects that Nubank will close last year’s consolidation with a revenue of US$ 4.8 billion and a net loss of US$ 26 million. The significant projection for 2023 is for US$ 7.4 billion in revenues and a net profit of US$ 305 million.