Nutmeg online investment - opinions?
Discussion
petemurphy said:
interesting thanks. best of the rest? seems a lot of love for vanguard on here?
Vanguard is amazingly good value, but does not manage portfolios for you. You select one (or more) and it stays within the original remit regardless of external factors.This could be a good thing or a bad thing, depending upon market cycles. Over the long term it can work well though.
I'll be the second person (that I know of) to add here that daily pricing feeds are not helpful for long term investment.
I certainly believe that Vanguard offers a better solution than Nutmeg however. This is, of course, only my personal opinion
More news this week on Nutmeg:
https://citywire.co.uk/new-model-adviser/news/nutm...
Basically, having already raised £116m from institutional investors and private equity backers they are now resorting to crowd funding to stay afloat.
The comments are interesting, basically highlighting it was always a flawed and doomed business model.
It looks very much like the current investors have said enough is enough and Nutmeg can't attract any new institutional or private equity money, as otherwise they would not have to resort to crowd funding to cover their huge annual losses (£12m last year alone).
It now seems to be a case of when they go pop, not if.
https://citywire.co.uk/new-model-adviser/news/nutm...
Basically, having already raised £116m from institutional investors and private equity backers they are now resorting to crowd funding to stay afloat.
The comments are interesting, basically highlighting it was always a flawed and doomed business model.
It looks very much like the current investors have said enough is enough and Nutmeg can't attract any new institutional or private equity money, as otherwise they would not have to resort to crowd funding to cover their huge annual losses (£12m last year alone).
It now seems to be a case of when they go pop, not if.
JulianPH said:
More news this week on Nutmeg:
https://citywire.co.uk/new-model-adviser/news/nutm...
Basically, having already raised £116m from institutional investors and private equity backers they are now resorting to crowd funding to stay afloat.
The comments are interesting, basically highlighting it was always a flawed and doomed business model.
It looks very much like the current investors have said enough is enough and Nutmeg can't attract any new institutional or private equity money, as otherwise they would not have to resort to crowd funding to cover their huge annual losses (£12m last year alone).
It now seems to be a case of when they go pop, not if.
If they do go bust what happens to peoples money? https://citywire.co.uk/new-model-adviser/news/nutm...
Basically, having already raised £116m from institutional investors and private equity backers they are now resorting to crowd funding to stay afloat.
The comments are interesting, basically highlighting it was always a flawed and doomed business model.
It looks very much like the current investors have said enough is enough and Nutmeg can't attract any new institutional or private equity money, as otherwise they would not have to resort to crowd funding to cover their huge annual losses (£12m last year alone).
It now seems to be a case of when they go pop, not if.
fiatpower said:
If they do go bust what happens to peoples money?
The money will be perfectly safe, though it might take a very long time before the administrators release it back to clients and it could be eroded by administration fees if there are not sufficient funds remaining to cover these costs.Spent £100m+ to get £1.5bn under management. And still losing almost 1% of AUM/year.
To me it really does show that acquiring clients with very little money is extremely expensive and then they don’t have enough money to ever generate sufficient fees to pay back that acquisition cost.
Just real fag packet stuff here but if the average client has £10k invested then they have 150,000 clients. That suggests that each client has cost around £1,000 to acquire. So to break even on a client they need to extract at least 10% of the client money out as fees.
You either need to slash acquisition costs or target larger clients but the whole concept of the model is to target small clients but the auisition cost of those clients is a massive % of their investment amount and the other aspect of their concept is that they are cheap.
To me it really does show that acquiring clients with very little money is extremely expensive and then they don’t have enough money to ever generate sufficient fees to pay back that acquisition cost.
Just real fag packet stuff here but if the average client has £10k invested then they have 150,000 clients. That suggests that each client has cost around £1,000 to acquire. So to break even on a client they need to extract at least 10% of the client money out as fees.
You either need to slash acquisition costs or target larger clients but the whole concept of the model is to target small clients but the auisition cost of those clients is a massive % of their investment amount and the other aspect of their concept is that they are cheap.
JulianPH said:
The money will be perfectly safe, though it might take a very long time before the administrators release it back to clients and it could be eroded by administration fees if there are not sufficient funds remaining to cover these costs.
Can I just clarify that, please? I agree that is the case in a "normal" insolvency, if there is any such thing, but if there's fraud, the assets have been stolen, misappropriated etc isn't the FSCS limit £50k?This has always slightly nagged away at me. I carefully spread my cash around so I don't go much about £85k with any one bank. But my broker has more than that. I appreciate it should be nomineed, segregated etc but if the broker goes bust and it turns out it isn't, am I screwed?
Yes. If there’s fraud then it’s a different scenario but it strikes me as exceedingly unlikely with Nutmeg that client funds won’t be fully seg and that the holdings will be in products that have the stated value.
The scenario you are mulling over is more the Beaufort Securities type.
The scenario you are mulling over is more the Beaufort Securities type.
DonkeyApple said:
Spent £100m+ to get £1.5bn under management. And still losing almost 1% of AUM/year.
To me it really does show that acquiring clients with very little money is extremely expensive and then they don’t have enough money to ever generate sufficient fees to pay back that acquisition cost.
Just real fag packet stuff here but if the average client has £10k invested then they have 150,000 clients. That suggests that each client has cost around £1,000 to acquire. So to break even on a client they need to extract at least 10% of the client money out as fees.
You either need to slash acquisition costs or target larger clients but the whole concept of the model is to target small clients but the auisition cost of those clients is a massive % of their investment amount and the other aspect of their concept is that they are cheap.
Hi mateTo me it really does show that acquiring clients with very little money is extremely expensive and then they don’t have enough money to ever generate sufficient fees to pay back that acquisition cost.
Just real fag packet stuff here but if the average client has £10k invested then they have 150,000 clients. That suggests that each client has cost around £1,000 to acquire. So to break even on a client they need to extract at least 10% of the client money out as fees.
You either need to slash acquisition costs or target larger clients but the whole concept of the model is to target small clients but the auisition cost of those clients is a massive % of their investment amount and the other aspect of their concept is that they are cheap.
14 months ago Nutmeg announced it went over the £1bm mark with 48,700 clients. This represented an average of £20,533 per client:
https://www.ftadviser.com/investments/2017/11/21/n...
In their accounts for the year end 31st December that year it showed operating expenses of £16,920,764.
This represents an acquisition cost of £2,382 per client on top of the additional annual costs of £347.44 per client each and every year.
These investors are realising they are never going to make their money back, let alone a profit, and so the free money tap has been turned off.
Crowd funding is obviously the last option available to Nutmeg before administration or a cheap buyout (which would be highly complex).
Our MD went to meet with them a few years ago when they wanted us to provide a Nutmeg branded Pension/SIPP. He called me after he left the meeting (warehouse style very expensive central London office, pool tables and beanbags, no one over the age of 22 - with an average salary of £80k - and a head of products who had no clue whatsoever as to pension rules, let alone the UK's financial services rules) saying "there is no f
king way we are going to work with them".JulianPH said:
fiatpower said:
If they do go bust what happens to peoples money?
The money will be perfectly safe, though it might take a very long time before the administrators release it back to clients and it could be eroded by administration fees if there are not sufficient funds remaining to cover these costs.I have about 4k in a HTB LISA, only been saving for 1 year in there,
Am i correct in thinking i can transfer the LISA to another platform? and still be able to contribute the £4k allowance for the new tax year? Or will i incur fees?
Cheers,
Edited by nealeh1875 on Wednesday 3rd April 17:16
DonkeyApple said:
Spent £100m+ to get £1.5bn under management. And still losing almost 1% of AUM/year.
To me it really does show that acquiring clients with very little money is extremely expensive and then they don’t have enough money to ever generate sufficient fees to pay back that acquisition cost.
Just real fag packet stuff here but if the average client has £10k invested then they have 150,000 clients. That suggests that each client has cost around £1,000 to acquire. So to break even on a client they need to extract at least 10% of the client money out as fees.
You either need to slash acquisition costs or target larger clients but the whole concept of the model is to target small clients but the auisition cost of those clients is a massive % of their investment amount and the other aspect of their concept is that they are cheap.
There was a blog post somewhere by Alan Miller of SCM Direct who was rather scathing of ROBOs and the point you highlight above.To me it really does show that acquiring clients with very little money is extremely expensive and then they don’t have enough money to ever generate sufficient fees to pay back that acquisition cost.
Just real fag packet stuff here but if the average client has £10k invested then they have 150,000 clients. That suggests that each client has cost around £1,000 to acquire. So to break even on a client they need to extract at least 10% of the client money out as fees.
You either need to slash acquisition costs or target larger clients but the whole concept of the model is to target small clients but the auisition cost of those clients is a massive % of their investment amount and the other aspect of their concept is that they are cheap.
In many cases they're paying a crazy amount per customer that far outstrips what they make.
williaa68 said:
JulianPH said:
The money will be perfectly safe, though it might take a very long time before the administrators release it back to clients and it could be eroded by administration fees if there are not sufficient funds remaining to cover these costs.
Can I just clarify that, please? I agree that is the case in a "normal" insolvency, if there is any such thing, but if there's fraud, the assets have been stolen, misappropriated etc isn't the FSCS limit £50k?This has always slightly nagged away at me. I carefully spread my cash around so I don't go much about £85k with any one bank. But my broker has more than that. I appreciate it should be nomineed, segregated etc but if the broker goes bust and it turns out it isn't, am I screwed?
DonkeyApple said:
Yes. If there’s fraud then it’s a different scenario but it strikes me as exceedingly unlikely with Nutmeg that client funds won’t be fully seg and that the holdings will be in products that have the stated value.
The scenario you are mulling over is more the Beaufort Securities type.
I think I need to clarify my point here:The scenario you are mulling over is more the Beaufort Securities type.
All FCA regulated investment managers use nominees, custodians and trustees (in the case of SIPP providers), often a combination, to completely ring fence client assets from their own. Nutmeg are no different.
So, as I said, your money is safe (by which I mean protected from creditors). Nutmeg are not doing anything fraudulently, they just are appearing to be running out of money.
In the event they were to enter into administration (and I think the more likely scenario is that their book of business would be bought out by someone else before this happened) then the administrators would charge a fortune for their work and these fees can legitimately be taken from client money.
As the Donkey has said, this only ever usually becomes a problem when dodgy investments are involved. To my knowledge this is certainly not the case with Nutmeg. Depsite all of the faults in their business model they are not in the slightest bit dodgy.
One odd exception to this can be Life Companies. They are structured in the same way as banks. That is to say that if they go pop then your money with them can go pop too as it often sits on their balance sheet. Equitable Life being a prime example of this.
Edited to replace a 'there' with a 'their'. A stupid error!!!
Edited by JulianPH on Wednesday 3rd April 17:34
JulianPH said:
Hi mate
14 months ago Nutmeg announced it went over the £1bm mark with 48,700 clients. This represented an average of £20,533 per client:
https://www.ftadviser.com/investments/2017/11/21/n...
In their accounts for the year end 31st December that year it showed operating expenses of £16,920,764.
This represents an acquisition cost of £2,382 per client on top of the additional annual costs of £347.44 per client each and every year.
These investors are realising they are never going to make their money back, let alone a profit, and so the free money tap has been turned off.
Crowd funding is obviously the last option available to Nutmeg before administration or a cheap buyout (which would be highly complex).
Our MD went to meet with them a few years ago when they wanted us to provide a Nutmeg branded Pension/SIPP. He called me after he left the meeting (warehouse style very expensive central London office, pool tables and beanbags, no one over the age of 22 - with an average salary of £80k - and a head of products who had no clue whatsoever as to pension rules, let alone the UK's financial services rules) saying "there is no fking way we are going to work with them".
Thanks. Funnily the correct figs still get to them needing to make 10% on a client to get back those original acquisition costs!!! I can’t believe they’ve got a cost of over £2k per client acquisition that is an absolutely insane number. 14 months ago Nutmeg announced it went over the £1bm mark with 48,700 clients. This represented an average of £20,533 per client:
https://www.ftadviser.com/investments/2017/11/21/n...
In their accounts for the year end 31st December that year it showed operating expenses of £16,920,764.
This represents an acquisition cost of £2,382 per client on top of the additional annual costs of £347.44 per client each and every year.
These investors are realising they are never going to make their money back, let alone a profit, and so the free money tap has been turned off.
Crowd funding is obviously the last option available to Nutmeg before administration or a cheap buyout (which would be highly complex).
Our MD went to meet with them a few years ago when they wanted us to provide a Nutmeg branded Pension/SIPP. He called me after he left the meeting (warehouse style very expensive central London office, pool tables and beanbags, no one over the age of 22 - with an average salary of £80k - and a head of products who had no clue whatsoever as to pension rules, let alone the UK's financial services rules) saying "there is no f
king way we are going to work with them".That mad thing is that one chap could run this business from a cheap regional office with a few IT guys, a good digital marketing agent and copy writer. With £1.5bn they should be highly profitable. They strike me as running far too big a cost base for a discount digital shop that targets the smallest investors. But even if you wanted to pick them up from the administrator you’ve got that slight issue of GS being in there!!
Julian - £2,382/client makes no sense. Have you arrived at that by dividing the £116m they've raised between the 48,700 clients?
If so, I'm not sure I agree with your methodology.
In 2017, reported client numbers rose from from 25k to 48.7k. They had total opex of £16.9m (your point about acquisition costs being on top of op ex is - I suspect - mistaken) so their per client acquisition costs can not have been higher than £16.9m / 23.7k = £713. As they will have all sorts of expenses that are not client acquisition related, I suggest that the "right" number is substantially lower than £713/client.
Anyway.... Will they run out of corporate funding before they reach critical mass and profitability? Almost certainly, as that is the traditional fate of these ventures! As you point out, that may be an uncomfortably near-term reality for them...
Tough sector, for which the answer has not yet been found. Perhaps the man from the Pru with his with-profits fund wasn't such a bad model after all....?
If so, I'm not sure I agree with your methodology.
In 2017, reported client numbers rose from from 25k to 48.7k. They had total opex of £16.9m (your point about acquisition costs being on top of op ex is - I suspect - mistaken) so their per client acquisition costs can not have been higher than £16.9m / 23.7k = £713. As they will have all sorts of expenses that are not client acquisition related, I suggest that the "right" number is substantially lower than £713/client.
Anyway.... Will they run out of corporate funding before they reach critical mass and profitability? Almost certainly, as that is the traditional fate of these ventures! As you point out, that may be an uncomfortably near-term reality for them...
Tough sector, for which the answer has not yet been found. Perhaps the man from the Pru with his with-profits fund wasn't such a bad model after all....?
WindyCommon said:
Julian - £2,382/client makes no sense. Have you arrived at that by dividing the £116m they've raised between the 48,700 clients?
If so, I'm not sure I agree with your methodology.
In 2017, reported client numbers rose from from 25k to 48.7k. They had total opex of £16.9m (your point about acquisition costs being on top of op ex is - I suspect - mistaken) so their per client acquisition costs can not have been higher than £16.9m / 23.7k = £713. As they will have all sorts of expenses that are not client acquisition related, I suggest that the "right" number is substantially lower than £713/client.
Anyway.... Will they run out of corporate funding before they reach critical mass and profitability? Almost certainly, as that is the traditional fate of these ventures! As you point out, that may be an uncomfortably near-term reality for them...
Tough sector, for which the answer has not yet been found. Perhaps the man from the Pru with his with-profits fund wasn't such a bad model after all....?
Opportunity cost would have been a better phrase. £116m of capital deployed and 48,700 clients generated (at the last available figures) remains £2,382 per client.If so, I'm not sure I agree with your methodology.
In 2017, reported client numbers rose from from 25k to 48.7k. They had total opex of £16.9m (your point about acquisition costs being on top of op ex is - I suspect - mistaken) so their per client acquisition costs can not have been higher than £16.9m / 23.7k = £713. As they will have all sorts of expenses that are not client acquisition related, I suggest that the "right" number is substantially lower than £713/client.
Anyway.... Will they run out of corporate funding before they reach critical mass and profitability? Almost certainly, as that is the traditional fate of these ventures! As you point out, that may be an uncomfortably near-term reality for them...
Tough sector, for which the answer has not yet been found. Perhaps the man from the Pru with his with-profits fund wasn't such a bad model after all....?
Setting aside the capital raised altogether, a business model that generates £92.40 in revenue for every £347.44 of overhead is quite simply not viable in any event.
Given that their operating expenses keep growing (up from £12m in 2016 to £17m in 2017) as their client numbers grow, unless they have unlimited access to capital to cover their losses (£12,356,970 in 2017) from people who are not bothered about seeing a return on their money for a very long time, this model is not going to end up well, as you rightly point out.
It is a tough sector, but I have found an answer in delivering a low cost digital investment solution with full human interaction available, that has a seemingly alien concept of actually making a profit and paying dividends to the shareholders!
And yes, despite its manifest failings, there was something to be said for the man from the Pru model that delivered a generation of people with retirement provision!
bhstewie said:
hstewie said: There was a blog post somewhere by Alan Miller of SCM Direct who was rather scathing of ROBOs and the point you highlight above.
In many cases they're paying a crazy amount per customer that far outstrips what they make.
Sorry, I missed this. Yup, I think many run the fun tech model of just trying to seize market share at any cost to either reach a critical mass or to get bought out. In many cases they're paying a crazy amount per customer that far outstrips what they make.
I do suspect that Nutmeg’s model from the outset was to to get bought out but their acquisition rate has been too slow and no one appears interested.
I had a 10/10 Risk account with them because my ISA was full and fancied taking a risk for higher returns.. Yesterday Ive asked them to close my account and transfer the lot back to my bank account. I know we have some protection but I simply cant be bothered to wait for everything to be processed if they do go under. Transferring the lot into my HL Stocks and Shares account which sits outside my HL ISA
oldaudi said:
I had a 10/10 Risk account with them because my ISA was full and fancied taking a risk for higher returns.. Yesterday Ive asked them to close my account and transfer the lot back to my bank account. I know we have some protection but I simply cant be bothered to wait for everything to be processed if they do go under. Transferring the lot into my HL Stocks and Shares account which sits outside my HL ISA
I am also looking to do this but mine is a HTB LISA so will get charged 25% to withdraw. Does anyone know if i can transfer to another HTB LISA provider? or can i switch the funds to a S&S LISA and withdraw that way penalty free?
Cheers,
brickwall said:
I've just put in the application to transfer the whole lot to HL, where I'll invest in a self-selected mix of funds. Will take 3-4 weeks to complete I I imagine; I guess they won't have gone bust by then.
It’s a real shame that you felt compelled to do that, based on one or two contributions to the thread. Gassing Station | Finance | Top of Page | What's New | My Stuff