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Nutmeg: another fintech firm ready to rip-off retail investors

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Nutmeg needs to raise some cash and has decided that a crowdfunding round is the best way of doing that. But we have several concerns. First, the company is going to need a huge amount of money to deal with its widening losses; second, new investors are only going to be offered a tiny slice of the hyped-up company; and third, the ‘robo-adviser’ business model in its current form is not sustainable. Read on to find out why.

Nutmeg, the UK’s largest ‘robo-adviser’ (which is the vague, irritatingly modern name for wealth managers which run their entire business online), needs some cash.

That’s hardly surprising. In the most recent set of accounts filed at Companies House (for the year to December 2017), the company reported that operating expenses had increased from £11.9m to £16.9m – far outstripping revenues which rose from £2m to £4.5m. Losses in 2017 were an uncomfortable £12.4m.

Nutmeg is spending a huge amount of money on marketing, meaning customers cost between £100 and £500 to acquire. Annual fees of 0.75% on small portfolios therefore don’t cover the costs of acquiring those customers.

Nutmeg’s problem (like all its peers) is that the volume of money its customers are investing is not enough to make it profitable. Even though the company has reportedly attracted some very wealthy customers, its average portfolio size is just £23,000. Based on its annual management fees of 0.75% it…

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