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Nutmeg losses pass £9m

Robo-adviser Nutmeg has seen its losses increase again as it continues its search for profitability by building an advice service.

While turnover increased from £1.7m to £2.6m for the year to December, expenses also increased by more than a million, resulting in an annual loss of more than £9.3m, up from £8.9m in 2015.

The firm managed around £600m for 25,000 customers as at the end of last year.

While it hinted again that it wants to make a bigger push in the advice space, its plans are not fully fleshed out in these latest accounts.

The statement reads: “The company is developing the most appropriate advisory proposition, following successfully applying for permission to offer financial advice.”

The firm said an “overhaul” of its pricing structure would bolster Nutmeg’s appeal. It has cut fees on several bands in the last 12 months.

Founder Nick Hungerford stepped aside, leaving Martin Stead to step into the chief executive role last May. The firm grew staff headcount from 57 to 71 over 2016.

Stead says: “We continue to invest in our products, services and people to give investors the quality they deserve. Our focus on innovation meant we were one of only three providers to launch a Lifetime ISA on day one, and help thousands of people under 40 invest for their first house or their retirement.

“Nutmeg is a rapidly growing business with over 47,000 new and experienced investors choosing to trust us with their investments. We have 80 per cent market share and everyone at Nutmeg is committed to continuing to lead the way in the digital wealth manager market.”

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Comments

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

  1. Justin, are these numbers right?

    Turnover £2.6m, loss of £9.1m?

    £600m between 2,500 clients? thats an average portfolio of £240,000. Average fees would be around £1240pa (Their fees are 0.75% on first £100k then 0.35% on balance) = revenue (x2500 clients = £3.1m).

    71 staff

    If you’ve got £240,000 of assets for investment, this isn’t really the savings gap market. Likely to get ever more complex due to pension/ISA rules complexity.. yet they want to cut fees further?

    hmmmm… when will they ever recover losses and have a sustainable business?

    80% market share? of WHAT? 2500 customers is not 80% market share. £600m is not 80% market share. What are these guys smoking? nutmeg?

    Also they say on their website they say “Unlike most providers, we’ll show you what you’re paying and how it affects returns”…. this isnt really true is it?

    • Typo: 25,000 clients. Apologies.

      • Does this mean that the next 100,000 clients are simply generating the revenue needed to pay off the last two year’s losses?

        I’m no expert on this kind of business model but at what point do you give it up?

    • Dominic – the answer is, that it will never be profitable according to my projections. Although some high profile investors have invested (wasted?) their money to fully fund it for while, at an average of a £25K pot per customer, they can’t afford to service them on £125 a pop, especially when client acquisition costs are high (TV advertising etc)so every client added is more money lost.

      The backers might get a bit of their cash back when the book is sold as trophy. Even the likes of Co-funds isn’t actually profitable in the long term round, since all the profits made over a cycle are burned up with tech upgrades.

  2. Stack it high and sell it (not so) cheap clearly isn’t working is it Nutmeg ?

    Putting aside the “robo advice” bit aside for one moment

    The staggering amount of cash one has to throw at setting something up like this beyond belief….. only, as Bryan Jones has pointed out it will never be profitable.

  3. I wonder how far this has to go before Nutmeg should be referred to one of the various fair trade bodies such as the ASA or OFT? It can’t be fair to have a business and marketing model that is based on the notion that other advisers and fund managers are too expensive, when their cut price model is clearly unsustainable and running at such a loss.

  4. Nutmeg is a system where the consumer goes commando from day one (i.e. no adviser to stop their nuts getting squeezed by the taxman any harder than necerssary), so once FUM gets to a reasonable size, how difficult is it going to be for any half decent adviser to poach their clients?

    This is not sticky money, QED it is not a business model I think is ever going to work.

    In the meantime it’s paying some senior bods good money to re-arrange deckchairs on the Titanic. This should qualify some of them for their next job…. high places at the regulator and an ultimate knighthood.

  5. Nice brand and website and they make it easy. Seems hard to gain traction quickly though in this D2C market. All of this when share prices are buoyant – how sticky will the money be when markets tank 30% and investors, with no one to turn to, panic out during a temporary downturn?
    Someone somehwere sometime will crack this model and turn a profit – surely?

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