Understanding Nutmeg Investment Alternatives: An Investors’ Guide

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10 min read/Updated: 23.10.2020

nutmeg investment alternatives

Gone are the days when investment management was the domain of the rich and famous. Today, a new generation of Robo-advisors are providing low-cost access to the investment market for ordinary traders around the world.

Not only are cheaper than human advisors, but they are also incredibly easy-to-use, tax-efficient and, with the help of AI, can help the average person make basic investment decisions.

One of the key players in this market is Nutmeg, a UK-based online investment management service. But what are some of the best alternatives? Other possible substitutes include:

Nutmeg Competitors

What are some of the best substitutes for Nutmeg? Here are some contenders:

Moneyfarm

Alternatives of Nutmeg Investment moneyfarm

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’s base management fee is relatively higher for a fully managed portfolio compared to Moneyfarm. Also, the average underlying fees (0.19%) of Nutmeg are lower than Moneyfarm (0.25%).

Hargreaves Lansdown

hargreaves lansdown

This is the UK’s largest broker and has clear and detailed information on every fund. It also provides tools to compare with peers. The firm charges up to 0.45% per year as administration charges on the fund you select depending on your portfolio size, and there are associated fund costs as well that will also eat into your profits.

Bestinvest

tilney bestinvest

This is one of the rival broker companies and it charges an annual fee for its services on top of the annual price clients pay to invest in the fund. Bestinvest charges 0.4% of the investment value as administration charges per year, with the client usually paying 0.75% for each fund.

Charles Stanley

charles stanley

If the biggest concern of a client is cost then Charles Stanley is the best choice as it charges low fees of 0.25% annually and offers research tools with investment trusts and funds.

Cavendish

cavendish online

Another cost-friendly broker house is Cavendish, as its cost is the same as Charles Stanley, but they don’t provide investment trusts. One of the key features of this company is that it does not charge any switching or exit fees, so clients will not be penalized.

Nutmeg Investment Alternatives Comparison

Moneyfarm: No trading fees

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Hargreaves Lansdown: Award-winning service

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Bestinvest: Wide range of investments

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Charles Stanley Direct: Great customer support team

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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.


Why Nutmeg Investment

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:

1. Availability in the UK

Nutmeg Investment is only available to UK customers.

2. Initial investment

Nutmeg requires an initial investment of as little as £100 to get started and the costs of managing funds are quite low compared to other brokerage firms.

3. Investment portfolios:

Nutmeg is a low-cost investment company which provides around ten investment portfolios for customers. Each portfolio is a mix of investment assets. Clients have a choice to select a fully managed or fixed allocation portfolio based on their appetite for risk.

4. Nutmeg Investment offering:

Nutmeg offers investment in stocks and shares ISAs, which are tailored based on risk profile. The general investment account (GIA) enables individuals to continue investing even after their annual ISA threshold has been reached.

They also offer a Nutmeg pension product and a Nutmeg lifetime ISA. Nutmeg investment also provides new investors with the ability to set up funds like a pension fund, a Nutmeg ISA and LISA very quickly.

5. Nutmeg Investment performance:

As per the Asset Risk consulting company, Nutmeg has performed well compared to competitors. Over the long-term, Nutmeg investments exceeded expectations and managed to secure a 58-75% return in an eight-to-ten-year time frame.

Nutmeg Fees

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 for Nutmeg:

  • Managed portfolio fees
  • Competitor managed portfolio fees
  • Fixed asset allocation portfolio fees

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.

 

How Safe is Nutmeg Investment?

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.

 

Funding and Awards

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 a 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:

  • The Your Money award for Best Online Stocks and Shares provider five years in a row (2015-19)
  • Chief investment officer, Shaun Port, has featured in ETF Stream 30 Index winners
  • The overall winner of innovation in the financial sector in 2016 from the FStech Awards and Best ETF Advisor and Best Robo Advisor in 2016 from ETF.com Awards
  • In 2014 Nutmeg received Euromoney Awards, Good Web Guide Awards and Ecommerce Awards for Excellence

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Customer Support and Robust Mobile Nutmeg App

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 – Our Verdict

Nutmeg was created by Nick Hungerford and is known to provide one of the best online investment portfolios 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.

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FAQ

Nutmeg will initially learn about an individual investor, before choosing the right investment and comes out with the right portfolio on their behalf.

There are three types of investment with different minimum investment in Nutmeg. For a Lifetime ISA, the minimum investment is £100, £500 for General, ISA pots and The Nutmeg pension.