Despite increasing its revenues by almost 50%, online investment manager – robo-adviser – Nutmeg saw losses increase last year as it continued to invest heavily to develop the ‘most approporate’ advice proposition for its customers, and said it may need to raise more cash to continue its expansion.
Its accounts with Companies House revealed that pre-tax losses went up from £8.9m to £9.3m in 2016 as operating expenses increased by nearly £1.2m to £11.9m.
Chief executive Martin Stead, who took over from founder Nick Hungerford in May last year has appointed a new executive team and said that the firm has grown ‘significantly’ and that it was using the last round of funding it received in December last year to expand its product offering and ‘rapidly scale’ the business in the UK.
‘Specific focus will be on innovation including new investing options, new tax wrappers and further developing the advice offering,’ he added.
The accounts reveal it increased the amount of cash it has in the bank from £8.9m to £27m after receiving funding from investors, including £24m from Hong Kong financial advice firm Convoy and £12m from Taiwan-based Taipei Fubon Bank.
Nutmeg raised a total of £42m from investors in 2016 after existing investors including Schroders, Balderton Capital, Pentech, Armada Investment Group and Nigel Wray injected £30 million into the business earlier in the year.
At the end of 2016 Nutmeg, managed £600m of assets for 25,000 customers; by June 2017 that is believed to have reached £900m, allowing the company to claim an 80% share of the UK robo advice market.
We are on a mission to democratise wealth management, by providing a great value, high-quality investment service to all investors
The business reported in a statement: ‘The directors have carried out a detailed review of the trading position and cash flow projections for the foreseeable future and have, based on the results of this review, determined that the company may require further cash injections to continue to develop and market its product offering and to build its customer base and its assets under management.
‘Under such a scenario, the directors have a reasonable expectation of securing additional funding from the existing shareholders and new investors.’
In a statement to Citywire, Mr Stead said: ‘We are on a mission to democratise wealth management, by providing a great value, high-quality investment service to all investors. We have set out to build a big business and we are on track with our business plan, with committed backers.
‘We continue to invest in our products, services and people to give investors the quality they deserve. Our focus on innovation meant we were one of only three providers to launch a Lifetime ISA on day one, and help thousands of people under 40 invest for their first house or their retirement.’
the business continues to focus on sustainable improvements through reductions in cost and friction associated with the trading process
He added: ‘Nutmeg is a rapidly growing business with new and experienced investors choosing to trust us with their investments. We have 80% market share and everyone at Nutmeg is committed to continuing to lead the way in the digital wealth manager market.’
Nutmeg said it is using an iterative approach to develop its online user experience based upon testing and learning from customer feedback and from data about customer behaviours; it invested in both its product and technology teams in 2016 and expects this investment to increase significantly in the future.
At the start of this year Nutmeg overhauled and simplified its fees and launched a new fund range delivering the choice between a fully managed portfolio and a fixed portfolio; more details here.
Nutmeg, was also granted permission to provide regulated advice in March 2016 which it sees as a key growth area; the company said:
‘The recent addition of a fixed allocation investment offering, coupled with an overhaul of the company’s wider pricing structure, is expected to increase Nutmeg’s appeal to a wider customer base and continue to further broaden its appeal.’
‘The company is developing the most appropriate advisory proposition, following successfully applying for financial advice.’
Nutmeg also highlighted that investment performance had been strong, with its portfolios registering top quartile performance in 2016.
‘As well as delivering value to customers through well-founded asset allocation decisions, the business continues to focus on sustainable improvements through reductions in cost and friction associated with the trading process,’ it said.
Many in the robo advice space will be eyeing Nutmeg’s figures very carefully; one thing for sure is that the company is throwing the kitchen sink at the quality and scope of its proposition and it hopes that will be recognised and reflected in ever increasing customer uptake in the future.