Nutmeg is a privately-owned UK-based company founded in 2011 and is registered as Nutmeg Saving and Investment Limited. It is an online discretionary investment management company specialising in investing in equities, corporate funds, gilts and gold on behalf of its clients. Nutmeg manages customer assets via Exchange Traded Funds (ETFs) and it raised close to £30 million in November 2016 from Convoy, one of Hong Kong’s largest financial services players. But what are the Nutmeg Investment alternatives? And is Nutmeg the best choice in an unbiased broker comparison?
In 2017 the company reduced its fees to beat the competition and now Nutmeg charges between 0.3%-0.95% depending on the size of the investment. Nutmeg does not charge any separate fees for set-up or for rebalancing a portfolio. There are three categories of fees: managed portfolio fees, competitor managed portfolio fees and fixed asset allocation portfolio fees, which are charged based on the investment portfolio. For example, an investment amount between £0 – £20,000 will attract 0.75% in managed portfolio fees, 0.7% in competitor managed portfolio fees and 0.45% in fixed asset allocation portfolio fees. The larger the investment amount the fewer Nutmeg fees will be paid by the client.
There are no charges for set-up, withdrawal or deposits, but to open an account a minimum investment of £500 is required. The fee structure is very competitive and depends on whether the client selects a fully managed portfolio or a fixed allocation portfolio. A fully managed portfolio is actively run and is more expensive (high risk and high returns) compared to fixed allocation, which has less risk associated with it. According to Nutmeg, clients investing through their portfolio services can increase their returns by 0.29% to 0.94% per year because this is the average amount they can expect to save on management fees with the company. It might look to be a small figure, but it can really add up during a long investing tenure.
Nutmeg is best suited to customers who want a cost-effective way to invest in financial markets but do not have the time or expertise to make their own investment choices. Also, to maximize returns, clients investing through Nutmeg should expect to invest for the long-term to see their investment grow.
Thinking more about a Nutmeg stock broker comparison – one of Nutmeg’s biggest competitors is Moneyfarm, which was launched in the UK after becoming one of the largest digital investment companies in Europe. Nutmeg charges less compared to Moneyfarm when management fees and fund charges are considered for each proposition. Moneyfarm also does not provide a pension product, so if a client wants to invest in a stocks ISA then Nutmeg is a better option. However, Nutmeg’s base management fee is relatively higher for a fully managed portfolio compared to Moneyfarm but if an investment amount is greater than £520,000 Nutmeg becomes less expensive. Also, the average underlying fees (0.19%) of Nutmeg are lower than Moneyfarm (0.25%). Hence, we can conclude that the trading fee of Nutmeg is lower than Moneyfarm for accounts above an estimated £236,000.
With regards to automated investments, Nutmeg stands up to scrutiny when compared to other providers, such as Vanguard data funds (0.30%), Wealthfront (0.40%), Sigfig (£10 per month flat fee) and Betterment, which charges between 0.35% to 0.15% depending on the investment size. Nutmeg’s fixed allocation portfolios charge a fee of 0.45% for accounts up to £100,000, which drops to 0.25% for any investments a penny over that bracket. Overall, the firm’s automated service is competitively priced, particularly for higher-end investors, and it also offers perks, such as more involvement by investment managers, thus making it a hybrid instrument for investors.
Like Moneyfarm, Nutmeg has an easy-to-follow fee structure that rewards users who invest more on its platform. Following is the cost analysis of the top nutmeg investment alternatives available:
If you are looking for bigger names, then Barclays and Axa Self Investor are good investment options. They levy a 0.35% annual charge which is comparable to the best stock broker firms in the UK.
According to the Nutmeg website, in the past two years the company was able to generate around £1.9 million in savings for their customers. Following are the factors which should influence an investor in making a final decision whether to put his or her business with Nutmeg or find some Nutmeg investment alternatives:
There have been several reviews and some press coverage regarding the fact that Nutmeg has yet to turn a profit. However clients should not worry, as investments are kept in the custodial bank (a specialized institution responsible for keeping clients’ investments secure) at State Street Corporation to safeguard the investment – this is an industry standard. Since client assets are kept separate from Nutmeg assets, in the case of insolvency or failure, clients’ money is secured from such adverse external factors.
Nutmeg also provides coverage through the Financial Services Compensation Scheme, which shields investments up to £85,000. Since Nutmeg believes in diversifying capital across a range of global assets, it mitigates the risk of overindulgence in one particular sector and also rebalances portfolios periodically to ensure high returns with investment goals. Nutmeg rates security as a key factor and has industry standard security. One thing to note is that the composition of assets in a portfolio is selected by the Nutmeg team, and like other robo advisors Nutmeg investment uses ETF to track indices like the FTSE 100. Investors are mapped accordingly based on risk appetite.
Since the company’s inception in 2011 it has won numerous awards. Since its establishment in 2019, Nutmeg has grown to become the largest digital wealth manager in the UK, with more than 70,000 investors asking the brand to manage their portfolios, which are worth more than £1.7bn combined. For the period September 2012-July 2019, they secured total growth of 47.1% for their investors, compared to 43.5% based on average competitor returns.
Since the company’s inception eight years ago, it has won numerous awards. This includes landing the Best Online Stocks & Shares ISA Provider award from your money.com for five years in a row up to and including 2019. Meanwhile, the firm’s chief investment officer, Shaun Port, has been included in the top 10 of the ETF Stream 30 Index winners, as a testament to his success in the field.
Following are a few awards the company has won:
Nutmeg is a robo advisor and online discretionary investment company. In order to open a new account, clients must answer a series of questions related to their investment goals and attitude toward risk. Based on their answers Nutmeg will assign a unique strategy based on algorithms to the prospective investor. Based on that strategy the company will build a portfolio which will include products such as equities, cash, bonds and real estate.
Another factor which influences investors is customer support. Nutmeg customer care is based in the UK and provides live chat, email and phone support from 08:00-19:00 (Monday-Thursday) and 08:00-16:00 (Friday). Response time by email is generally one to two days, and the customer can log a ticket via email in case a service representative is not available by phone. According to our Nutmeg review and customer feedback, in the majority of cases service agents were able to resolve customer queries and did not require repeated follow-ups.
No investment company is complete without offering mobile apps for their customers. Nutmeg has free apps for both iOS and Nutmeg android. These apps are specially designed to check asset performance and to keep track of ISA allowances, topping up of the portfolio and to set regular payments. The overall rating of the Nutmeg app is 4.6 on Google Play, and around 70,000 investors across the UK are associated with Nutmeg through their investments portfolio.
Nutmeg was created by Nick Hungerford and is known to provide one of the best online investment portfolio and robo advisory services. It provides one of the cheapest online investment services for clients looking to experts to manage their portfolios and make investment decisions on their behalf. Nutmeg provides decent returns for its clients and has outperformed many of its competitors with a comparatively high-risk portfolio. Nutmeg is known to provide competitive services with user-friendly tools and quality customer service. Low-cost fixed allocation portfolios are definitely going to attract clients who want peace of mind and don’t want to participate actively in the market. The only downside is that the Nutmeg minimum investment requirement may be high for certain investors. The fees charged on managed portfolios is also a bit high, but overall, Nutmeg’s stellar performance, simple and easy access to stocks and shares ISAs and a pension product with an excellent track record make it a winner.