Nutmeg’s online offering cracks UK wealth market
Shaun Port, Nutmeg
Nutmeg, the online investment company, set out to deliver solutions to those clients who would not have interested traditional private banks, says CIO Shaun Port, but is also attracting those much further up the wealth ladder
The streets of Vauxhall, just south of the River Thames, are not the typical location for your average London-based wealth manager, more likely to be housed in the plush West End. But it is here that Nutmeg, the online investment service, has chosen to set up shop.
“We’ve only ever had nine clients come to our offices,” admits Shaun Port, chief investment officer, adding that the company, which launched to the public in October 2012, has grown too big for its first location and recently set up a satellite office in nearby Oval.
Founder Nick Hungerford, who had worked at Brewin Dolphin and Barclays, came up with the idea for Nutmeg when studying for an MBA at Stanford University in California, US. “His plan was to help his friends that had £10,000 (€14,000) or £100,000 a year to invest and wanted a Goldman Sachs kind of service but at a lower cost,” explains Mr Port, and technology made this possible.
The Nutmeg website is very intuitive and easy to use, with sliding bars to toggle investment amounts and risk profiles, but keeping things simple takes a huge amount of work, he admits.
Mr Port, who was one of the firm’s first employees and in place for the initial launch, is quick to point out that Nutmeg is not a robo-adviser. “We call ourselves a discretionary wealth manager,” he says. “The fact is we are doing it online... we are easy to access and not face to face, which cuts our costs dramatically.”
Nutmeg exclusively uses ETFs in its investments, which helps to keep things transparent and reduce costs. “We never said we would just use these products but I am finding that in all the asset classes I want to invest in, ETFs are the best way,” says Mr Port.
He refuses to disclose how much the firm has under management, claiming it is a way for the industry to say whether firms are significant or not, and that Nutmeg is not into asset gathering, rather encouraging investors to think longer-term and in a portfolio context.
The only fee is the annual management charge, which ranges from 0.3 per cent to 1 per cent depending on the amount invested, plus the underlying fund costs, which average 0.19 per cent. There are no withdrawal costs as long as investors stick to “the weekly investment cycle”; faster ‘express’ and ‘super express’ withdrawals incur charges of £10 and £40 respectively.
We call ourselves a discretionary wealth manager. The fact is we are doing it online rather than face to face
The minimum investment threshold is £1000, which then needs to be topped up by £50 a month, a requirement that disappears for initial deposits of more than £5000, although 40 per cent of clients are regular savers. But Nutmeg, the majority of whose customers are based in London and the south east of England, is also proving attractive to those much higher up the wealth ladder.
“We haven’t explicitly targeted HNW clients but we are getting them,” explains Mr Port. “The average age of our investors is 38 years old, which is probably around 30 years younger than the average age of a lot of people’s clients.”
Younger investors tend to use Nutmeg to oversee most of their savings, while HNWIs are likely to have a smaller share of wallet with the firm. “Here we often tend to see them put in £100,000 to test out the service, see how it works and if they like it we get a million pound transfer.”
Digital offerings have been a hot topic for all wealth managers in recent years, but start-ups have a big advantage over established private banks, believes Mr Port. “I think that if you start with a clean sheet of paper you can think much more about how is a typical HNWI going to be serviced in five years time – it is going to be a lot of mobile, a lot of
digital, access when they want it, real time feeds and so on.”
But if wealth managers are casting a nervous eye towards the likes of Nutmeg, does he not see a threat from the possibility of one or more of the tech giants moving into the financial world? “I think every asset manager is worried about Google, or Apple or Facebook,” admits Mr Port.
“But for those firms, payment systems are much more interesting to begin with. When they start to get into investments, the whole regulation bit changes for them, which makes things a bit harder and a bit less flexible. There is a big market in money exchange and transfers but once you start managing people’s money it is a different ballgame.”
