Nutmeg Review 2019

Nutmeg was co‑founded in 2011 by Nick Hungerford and William Todd who were frustrated by the exclusivity and lack of transparency in the investment world and wanted to help a new kind of investor. Nutmeg prides itself in providing a transparent operating platform where customers can easily access information about fees as well as how portfolios are constructed and managed. Nutmeg currently has around

£1.5 billion of assets under management. A seven‑member investment team is responsible for investment strategy, risk management, ETF research and portfolio performance.

Nutmeg scores well in the area of trustworthiness. They are regulated by the UK Financial Conduct Authority (FCA) and have recently started a new investment advisory service for a fee of £350 including VAT. The company participates in the Financial Services Compensation Scheme for an amount up to £50,000, and Nutmeg’s asset custodian is State Street Corporation with £28 trillion in assets under custody. Any uninvested cash is kept with Barclays Bank where it is segregated from Barclays' and Nutmeg's own funds.

Nutmeg is serious about cybersecurity and gives clients the option to use two‑factor account authentication if they wish. Nutmeg has an in‑house dealing team, but also deals directly with specialist ETF market makers. The company makes their 5‑year and all‑time historical track record available across 10 different asset allocations (depending on the client’s risk score) and is very transparent about investment strategies and pricing.

Nutmeg has a very user‑friendly desktop application. Investors can create a new portfolio in as little as 10 minutes, answering a series of questions to help calibrate and gauge their risk appetite. Based on these questions, an appropriate portfolio is constructed.

The desktop application makes it easy to track historical performance over time, as well as some projections about potential future returns. It is also possible to follow different accounts (for example an ISA and a general investment account) in one place. Topping up the account is also very straight forward and can be done either through a monthly direct debit to a bank account or through a bank transfer or payment with a bank card. Payment with a credit card is not possible.

Nutmeg has a mobile app for both iPhone and Android, but the interface is quite basic. Security is adequate with Touch ID or Face ID unlocking mechanisms on the iPhone. The app lacks more sophisticated features and is basically a way to monitor investments on the go. Like other robos, there are no mobile watchlists, price alerts, news or customizable watch lists. It is possible to add or remove funds from the account via the mobile app, but its features are mainly limited to updating the customer on the value of their account.

Nutmeg is a plain vanilla robo‑advisor and lacks some features offered by other more sophisticated operators. For example, there are no margin loans available, preventing investors from enhancing returns in a rising market, but also protecting them in a bear market. Nor does Nutmeg offer banking features like a current account (checking account) or savings account.

Tax optimization features offered by other brokers are not available, and investors are unable to implement hedging strategies for their portfolios. Nutmeg has recently introduced socially responsible investing, however, for those investors who are concerned with environmental, social and governance (ESG) factors in measuring the sustainability and ethical impact of an investment.

Nutmeg scores well in the area of customer support. The website has an online chat feature for both current and prospective clients. A comprehensive section with frequently asked questions (FAQs) is backed up with a separate support page and an additional investor blog page. Support is also available over the phone and by email during business hours and on social media to a lesser extent. For investors requiring some additional support and planning, Nutmeg recently launched a paid investment advisor service.

Nutmeg invests mainly in exchange-traded funds (ETFs) which gives investors some degree of portfolio diversification. These funds provide access to various asset classes for small to medium clients that are targeted by Nutmeg. A more fully diversified investment portfolio, however, would need to include other investment options such as stocks and shares or individual bonds or alternative investments.

Nutmeg creates portfolios according to a customer’s risk profile, which is determined based on the answers to a series of standard risk‑related questions. This is mainly for guidance, as investors can choose what kind of portfolio they want (between a low or high-risk tolerance). It is also possible to create different investment pots, which allows customers to make investments based on various investment goals and time horizons.

While there are different investment strategies to choose from, it is not possible for customers to choose different asset types. Nutmeg mainly uses ETFs to meet investment goals. Finally, Nutmeg does offer different account types ranging from general investment to personal pensions to ISAs (similar to IRAs in the US).

Nutmeg seems to have slightly fewer research tools compared to competitors, and certainly less than a full‑service broker. This is mainly because Nutmeg makes investments at their discretion, and there is no need or ability for customers to choose individual investment vehicles, like ETFs.

There is a blog page that they call “Nutmegonomics” where clients can obtain information about a range of market-related topics such as investing, the economy, savings and retirement. Clients receive a monthly investor update via email that contains a 5 to 10‑minute video overview about market developments over the past month. These videos can also be found on the company’s YouTube page. Nutmeg also has a pension calculator to help customers with a personal pension account determine if they are on track. The fact remains that most customers only need to decide how much investment risk they are willing to tolerate, and Nutmeg invests accordingly.

Nutmeg ranks relatively poorly when it comes to investor education and services. This is largely because portfolios are constructed at Nutmeg’s discretion, so they assume their clients don’t need education or will find it elsewhere. For example, there do not seem to be any educational videos explaining basic investment concepts. Instead, the company’s YouTube channel is largely dominated with videos explaining what Nutmeg is and introducing their investment team or announcing the launch of new services such as socially responsible investing or their advisory service.

The one exception to this is the monthly investment update, but this is a market update rather than basic investor education. There also appears to be no glossary of investment terms nor does the company seem to host live events for clients.

Nutmeg scores well when it comes to fees. There is no set‑up, trading or exit fee. The company offers two management options, fixed allocation with an annual management fee of 0.45% and a fully managed portfolio with an annual management fee of 0.75%. These fees drop for accounts over £100,000, and investors can get started for as little as £500 provided they contribute an ongoing £100 monthly contribution.

Socially responsible portfolios cost the same as fully managed portfolios, giving investors the option to participate in ethical investment opportunities without additional costs. Nutmeg’s management fees are competitively priced to peers, but the company has slightly lower average fund charges and lower transaction costs that give them a cost advantage.

Because Nutmeg is a robo-advisor, it is best for “set‑it‑and‑forget‑it” customers who want to outsource market research to professionals. People who want to have more active interaction with and control over their investments should look elsewhere.