Nutmeg Spices Up Wealth Management

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Nutmeg Spices Up Wealth Management

Positives

For those that haven't managed to attract the interest of a private banker or lack the confidence or know how to locate the right financial advice, Nutmeg offers an incredibly simple to use, transparent investment approach that provides access to the benefits of active portfolio management ... without the excessive fees.

Negatives

Nutmeg's core appeal is accessibility, transparency and simplicity. This will not appeal to everyone. For those who already in bed with a financial partner that satisfies them, there's probably not a lot here that will tempt you into a bout of bed hopping.

Spice Up Your Wealth Management With Nutmeg

Nutmeg is a UK-based online wealth management platform founded in 2011 providing access to fully managed investment portfolios.  Your friendly private banker / financial advisor / wealth manager / [insert title here], not required.  As at time of writing Nutmeg has over 95,000 registered users.

Why Nutmeg?  Simplicity, transparency, low cost and low ‘barriers to entry’.  Nutmeg’s CEO, Nick Hungerford, is fond of noting that:

“Before Nutmeg, personal wealth management was only available to people with £250,000 or more. Everyone else had to use DIY platforms and complete investment analysis and asset selection themselves. This was a problem: not everyone with less than £250,000 has the time or knowledge to decipher the implications of a Fed rate hike on Japanese equities”.

According to Nutmeg, this accessibility doesn’t come at the expense of performance.  They employ a team of wealth management experts who actively monitor and rebalance each of their 10 model portfolios.  They also publish the portfolios performance to enable easy comparison with traditional wealth managers.

Fees?  Gone are the complex fee structures in typical wealth management models where, if you’re lucky, value and returns are clear … but the amount it costs you to generate them are not.  Nutmeg’s fee structure consists of: a management fee of between 0.3% and 0.95% (including VAT), based on how much you invest, and 0.19% in average underlying fund costs.  The fund costs compares to the UK active fund average of 1.58%.

Nutmeg’s investment model is simple, too.  The Nutmeg team invests primarily in low-cost ETFs (Exchange Traded Funds).  One of 10 diversified portfolios are then allocated to you based on a short questionnaire that asks you to specify your time horizon, investment goals and risk appetite.  All via a simple dashboard-style interface with easy-to-use sliders for selecting risk levels and amount to invest.

Note: Nutmeg has recently received permission to offer financial advice (rather than just investment products) from the Financial Conduct Authority as at Apr 20, 2016.  Expect something new from the team soon.

Key Features

  • Low and transparent fees (savings of between 0.29% and 0.94% over the typical wealth manager)
  • No knowledge required: 10 diversifies portfolios ranging from cautious to aggressive based on your individual risk appetite and personal investment goals
  • Create as many funds as you like based on a combination of investment aims, time horizon, amount to allocate and risk
  • Top up, transfer or withdraw your money whenever you like, without penalties (except for emergency withdrawals)UK retail investors with
  • Access to real people when you need them, via telephone email or live webchat (we hear the service is excellent, too!)

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Best Suited For

Investors that will particularly benefit from a Nutmeg-style platform will likely have the following characteristics:

  • UK retail investor
  • Who sits on the lower end of the financial literacy scale (or who has little interest in managing their own investments)
  • Doesn’t have large sums to invest (but would like to benefit from expertise that is usually reserved for those with higher sums)
  • Values low fees

For other investors, particularly more sophisticated / knowledgeable investors, they may still wish to allocate a portion of their funds to Nutmeg.  For those that enjoy a mutually beneficial relationship with an existing wealth manager, why fix what aint broke.

Getting Started

Nutmeg has wisely chosen to let potential members ‘test it out’ first.  The whole process takes less than 10 minutes:

  • Go to www.nutmeg.com and click on the ‘Test It Out’ button
  • Choose the type of account you’d like to start with: General, ISA (tax-free investment) or Pension (401k)
  • Select whether you’ve investing to reach a particular goal (e.g. wedding, house) or, simply, to invest
  • This takes you to the fund building screen, from which you then select the timeframe for your investment, your starting amount and monthly contributions, as well as your risk level
  • Voila!  You’re presented with a variety of ‘snappy’ graphs showing your projected returns, the breakdown of your model portfolio and the returns of comparable portfolios over the last 20 years
  • Finally, you complete a more detailed risk assessment to confirm your initial choices (takes about 5 minutes), before entering relevant personal and bank details to get started.

 

For those that wish to go ahead and sign up, note the minimum up front investment of GBP 500, with additional GBP 100 monthly instalments.  If you’ve got a spare GBP 5,000, the GBP 100 monthly requirement is waived.

Importantly, there are no withdrawal fees or early redemption penalties.   If it’s not for you, you walk away at a time of your choosing.

In the world of wealth management there are very few who are so forgiving.

What Others Are Saying

Euromoney, March 9, 2015: The UK fintech start-up will manage your wealth for a small, transparent fee. Is this the start of a shake-up in the protected world of private banking? In a business where fees are invariably opaque but investors can often pay 1% to 2% in management charges to advisers on top of all the other underlying costs for individual funds in their portfolios, plus start-up fees of up to 3% and other friction costs for adjusting portfolios, a 0.3% fee is an absolute game changer.

Professional Wealth Management (pwmnet.com), 3 August, 2015: 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.

About The Author
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