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Nutmeg loss deepens as regulatory burden bites

Digital wealth manager Nutmeg reported a loss of £12.4m in 2017, an increase on the previous year’s loss of £9.4m.

The robo-adviser, which was in its fifth year of business last year, saw its turnover increase 56.1 per cent to £4.56m from £2.56m in 2016.

Nutmeg assets pass £1bn

Nutmeg saw a customer growth in 2017, as its user base passed 50,000 last year, compared to 25,000 in 2016.

Nutmeg says it acquired thousands of new Lifetime Isa customers due to being one of the only providers to offer the product at the time it was introduced in April 2017.

The robo-adviser has also launched fixed portfolios, to complement its previously offered fully managed service to approach new type customers, last year.

The accounts, filed to Companies House, say Nutmeg had to put “significant resource” towards preparing for Mifid II.

It says: “The developments required for this regulation drew on resources from almost every area of the business throughout the second half of 2017. The breadth and complexity of accommodating these new rules was particularly burdensome for smaller wealth managers, such as Nutmeg.”

The accounts allude to Nutmeg conducting work around financial advice, saying it is “leveraging its financial advice licence” to develop its online advice proposition.

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Comments

There are 8 comments at the moment, we would love to hear your opinion too.

  1. Wow! What an achievement! A loss almost 3 times bigger than turnover.

    Does Robo advice mean – Really not a sound proposition – steer well clear. I really wonder which mugs continue to find these money burners.

  2. Turnover up but dwarfed by ever increasing losses. Hmmm…

  3. Does this not illustrate the challenge for any start-up automated advice proposition – Nutmeg, by their own admission, is the largest in Europe and still they can’t make a profit. It shows the challenge of a large number of customers with only small amounts to invest. What automation needs to succeed (ie be profitable) is a large customer base that can be accessed cheaply to gain real economies of scale. That sounds like banks and insurers to me…

  4. Nicholas Pleasure 8th October 2018 at 1:45 pm

    Amazing. They have some very understanding backers.

    The problem, as Nutmeg are finding, is that when you have built your system and are just on the cusp of profitability, the FCA change the rules.

    It is the reason why the UK advice industry remains a cottage industry. The risks are too great for most major investors. Oldies like me can name all the big players who have tried and failed.

  5. Roddi Vaughan-Thomas 8th October 2018 at 3:43 pm

    It’s advice, but not as we know it. Supposing it lasts another year – who will it hand over its non-advised orphaned customers to? The FOS?

    • An good point. Their ICAAP must make for interesting reading.

    • The non-advised clients (who have always been non-advised) will be snapped up by Aegon or Standard Life or another D2C dinosaur.

      That has always been the business model anyway – survive long enough to be bought out – like most dot-coms.

      The problem is that if I was one of the Standard Lifes of this world and was reading Nutmeg’s figures, I would wait for them to go bust so I can buy the client book from the administrator at fire sale rates.

  6. I’ve been in meetings with FinTech types who say, with a straight face, “We’re going to make it possible for somebody who pays £2.75 in a coffee bar to round it up to £3 and put the extra 25p in a stock-and-shares ISA. There are others who say that young adults these days don’t want to spend time engaging with an adviser because they supposedly have more important things to do. Those people are the supposed market for robo-advisers. Fine. Nutmeg et al are welcome to that market and are welcome to lose £12.4m a year servicing it. We’ll carry on as we are thank you very much, because we have no difficulty at all engaging with young adults needing advice who do have sufficient common sense as to realise that they can allocate 90 minutes a year out of their busy schedule, that it doesn’t have to be in the middle of Glastonbury of the Leeds Fest, and that Costa-lot Coffee will still be there for them AFTER the meeting. We for our part have zero wish to engage with those who don’t wish to engage with a real human being. In our experience, such people tend to be incapable of taking advice anyway, as well as being unwilling to pay for it. So, go for it Nutmeg, you’re doing us a favour!

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