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Nutmeg losses soar to £12.4 million as regulatory costs bite

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Nutmeg losses soar to £12.4 million as regulatory costs bite

Nutmeg’s losses rose by nearly a third to £12.4 million last year, with the company blaming rising regulatory costs and continued investment in the business.

The figure marked a 31.9% increase on the £9.4 million operating loss it posted in 2016, according to the company’s accounts for the year to the end of December, posted at Companies House.

Revenue surged by 76.9% from £2.6 million to £4.6 million, but operating expenses rose by 42% to £16.9 million, up from £11.9 million, over the period. The firm’s wage bill grew from £5.3 million to £6.6 million as its average staff headcount increased from 71 to 88 year-on-year.

Nutmeg, led by CEO Martin Stead (pictured), also reported £25.4 million of net cash in the bank.

The online wealth manager passed the £1 billion assets under management (AUM) mark in November, up from £600 million at the end of 2017. It now runs money on behalf of 50,000 clients and it now boasts over 50,000, an increase of 42.9% year-on-year, with its customers’ ages ranging from 18 to 96.

But despite this mounting client and asset growth, last year proved challenging for Nutmeg as it readied itself for both Mifid II, which came into effect in January this year, and GPDR in May.

The company said: ‘Despite an increase in competition, Nutmeg remains, by a significant distance the largest European pure online digital wealth manager and one of the fastest growing wealth managers in the UK. Nutmeg continues to invest in the business and this investment is reflected in the trading loss reported.

‘2017 also brought additional regulatory requirements and the business needed to devote significant resource and further enhance its control framework and prepare for Mifid II regulation. The developments required for this regulation drew on resources from almost every area of the business throughout the second half of 2017’.

It added: ‘The breadth and complexity of accommodating these new rules was particularly burdensome for smaller wealth managers such as Nutmeg. Even so, Nutmeg successfully met this regulatory deadline.’

In a strategic update, Nutmeg said it invest in its IT systems to ensure they are robust while always looking to enhance client experience. The company it remains on track with its business plan and highlighted opportunities around expanding its financial advice proposition.

Its Android app was launched late in 2017, following on from the Apple iOS app it released in January that year, broadening the service’s appeal. In the same period Nutmeg launched its first fixed allocation portfolios, extending its product suite.

The firm’s model portfolios also established five-year track records, outperforming their ARC benchmarks.

‘Nutmeg has now fully established itself as a credible and high performing alternative to traditional wealth managers who manage wealth for high net worth individuals,’ the company said.

Nutmeg also partnered with challenger bank Fidor to provide an investment platform for its clients in July 2017 and it is also looking at opportunities in Asia, with Hong Kong-listed Convoy Global having taken a 17.9% stake in the business for £24 million stake in a 2016 £30 million fundraising.

Commenting on the results, Stead said in a statement: 'We have made investing more accessible to swathes of people who were previously ignored or over-charged by a self-serving industry. 40% of our customers have never invested before; 35% are female – compared to a market average of just 26%; and the average age of our investor is 40 – around 10 years younger than the industry average.

'What’s more, we have out-performed the average returns of traditional wealth managers (as independently benchmarked by ARC) every year since inception. We have an ambitious growth agenda and we continue to invest in people, technology and marketing to ensure our award-winning service meets the needs of a much broader range of customers than ever before.'

 

 

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