In this review, we are going to take an honest look at Nutmeg and the products they offer on their platform. We look at everything including fees, fund performance and customer reviews for the platform. Every financial platform comes with its own strengths and weaknesses. After reading this, you should be able to make an informed decision on whether or not Nutmeg is for you.
Our Thoughts – In our opinion, Nutmeg isn’t the best Robo Advisor on the market right now. If you’re looking for lower fees and better historical performance (last 5 years) we recommend checking out Moneyfarm. They have a slick modern platform that is easy to use and also has many of the same features as Nutmeg. If you want more information check out our full Moneyfarm review.
Nutmeg stands as a pioneering force in digital wealth management or "robo-advisory". With a vision to transform traditional investment services, Nutmeg offers a transparent, affordable, and user-friendly online platform. Users are assessed for risk appetite and then recommended tailored portfolios, primarily constructed using diversified Exchange Traded Funds (ETFs). Nutmeg prides itself on transparency, presenting straightforward fees and granting clients full visibility into their investment breakdowns.
- Easy to use website and app
- Assesses your risk tolerance before investing
- Set and forget investing
- Transparent fees
- Fund performance on lower risk funds has been poor historically
Who Are Nutmeg?
Nutmeg is one of the pioneers in the world of digital wealth management, commonly referred to as “robo-advisors”. Established in 2011, this UK-based company has aimed to revolutionize the investment landscape by offering a more transparent, cost-effective, and user-friendly alternative to traditional investment services.
Key Features and Services:
- Online Investment Platform: Nutmeg provides an online platform where users can easily set up and manage their portfolios. Through a series of questions, Nutmeg gauges the risk appetite of its users and recommends a suitable portfolio.
- Diverse Portfolios: Nutmeg offers a range of portfolios tailored to different risk levels and investment goals. These portfolios are constructed using Exchange Traded Funds (ETFs), which provide diversification across various asset classes and geographical regions.
- Automated Portfolio Management: Based on modern portfolio theory, Nutmeg’s algorithms rebalance portfolios as market conditions change to ensure that clients’ investments remain aligned with their risk profiles.
- Transparency: One of Nutmeg’s core values is transparency. They offer clear fee structures without any hidden charges, and clients can access a detailed breakdown of their investments at any time.
- Educational Resources: To empower its users, Nutmeg provides a plethora of educational resources, including articles, videos, and webinars on investment principles, market insights, and financial planning.
What Products Does Nutmeg Offer?
Nutmeg has 5 different investing vehicles on its platform. Let’s take a look at the different products they offer.
Stocks and Shares ISA
This account allows you to invest up to £20,000 per year without paying any tax on your profits, even when you withdraw. You pay no tax on capital gains, income, or dividends. Remember you can only have £20,000 spread across multiple ISAs in a single year.
Stocks and Shares Lifetime ISA
A lifetime ISA allows you to invest up to £4,000 per year and receive a 25% bonus on any deposits from the government. You must use your lifetime ISA towards purchasing your first house or alternatively, you can wait until you are over 60 to withdraw without any penalties.
Stocks and Shares Junior ISA
A junior ISA allows you to invest up to £9,000 for your child. Once they turn 18 they can access this money. It’s a great way to put money away for their first car, house deposit or university.
General Investment Account
This is a general investment account with no tax benefits. You can buy and sell shares as you please but will have to pay capital gains tax on any profit over your yearly allowance of £6,000.
You can manage your personal pension within Nutmeg through a SIPP (Self Invested Personal Pension). Any money added to your pension will get a 25% bonus from the government, potentially more if you’re a higher-rate taxpayer. You can then manage your own pension investments.
How Nutmeg Investment Management Works
Nutmeg is a low-cost investment platform helping people to invest in a straightforward manner. They focus on low-cost ETFs and tracker funds so they can charge lower fees for their services.
When signing up to Nutmeg they will be assess you for risk tolerance. Depending on your choices, you have 10 different portfolios to choose from, each based on a different level of risk (1 to 10). These portfolios are actively managed by Nutmeg’s investment team to reflect the current economic environment. If you prefer to invest ethically, Nutmeg also offers 10 fully managed socially responsible portfolios.
Nutmeg also offers fixed-allocation portfolios. These are not actively managed and instead are simply designed to perform without the intervention of an investment team. Due to this, these fixed portfolios come with much cheaper fees.
As well as these two options Nutmeg released a new managed portfolio service in 2020 called ‘Smart Alpha Portfolios’. Currently, they have 5 of these portfolios which are powered by J.P. Morgan Asset Management. The J.P. Morgan team and Nutmeg team will monitor these portfolios through changing market conditions while ensuring the portfolio remains aligned with long-term objectives.
Nutmeg Investment Styles
Nutmeg has 4 different investment styles to choose from when setting up your portfolio. Let’s take a look at how each of them works.
Fully Managed Portfolios
Nutmeg offers a “Fully Managed” investment style tailored for individuals who prefer expert management of their finances. This service entails a team of qualified professionals building and maintaining a globally diversified portfolio on behalf of the investor.
The primary investment vehicle used in this style is Exchange Traded Funds (ETFs), which track various market indices and allow for broad exposure without purchasing each asset separately. The Nutmeg team proactively monitors and rebalances the portfolio, making strategic changes based on current economic data, news, and analysis to ensure alignment with the client’s long-term goals.
Smart Alpha Portfolios
Nutmeg’s “Smart Alpha” portfolios represent an exclusive collaboration with J.P. Morgan Asset Management, merging Nutmeg’s foundational investment principles and proficiency in ETFs and fractional investments with the extensive multi-asset expertise of a global investment titan. Tailored for those aiming for enhanced returns via astute, transparent security selection, these portfolios offer a global diversification of ETFs adjusted to individual risk preferences and goals.
What sets Smart Alpha apart is the incorporation of research-informed security selection and the inclusion of both passive and innovative active ETFs, leveraging J.P. Morgan Asset Management’s research prowess. The asset allocation is expertly handled and adjusted by J.P. Morgan’s multi-asset specialists, boasting a rich 150-year investment history. Both teams collaboratively monitor and adapt the portfolio, ensuring its continued alignment with long-term aspirations amidst shifting market landscapes.
Socially Responsible Portfolios
Nutmeg’s “Socially Responsible Investment (SRI)” portfolios cater to those desiring investments in companies and bond issuers with strong environmental, social, and governance (ESG) standards. Under the vigilant eyes of their in-house investment team, these portfolios prioritize entities that are adept at managing risks stemming from ESG factors.
Investments are made predominantly in Exchange Traded Funds (ETFs) that shun companies involved in controversial practices, instead highlighting those excelling in ESG performance. Similar to their “Fully Managed” style, Nutmeg’s team continuously oversees and adjusts the SRI portfolio, ensuring it remains in line with the client’s long-term goals.
Fixed Allocation Portfolios
Nutmeg’s Fixed Allocation investment style offers a hands-off approach for those desiring a diversified portfolio without ongoing management costs. By investing in a global assortment of exchange-traded funds (ETFs), which track various market indices, investors can access a broad spectrum of assets without purchasing each one individually.
Once set up, this portfolio rebalances itself automatically to align with the investor’s chosen risk level, ranging from low to high. Although there is no continuous management, the assets are reviewed annually to ensure they align with the investor’s preferences. Essentially, Fixed Allocation is a “set and forget” strategy, underpinned by Nutmeg’s expertise in determining the initial mix of investments.
When investing with Nutmeg, you will pay 3 main types of fees. These are Platform fees, fund fees and market spread.
|Investment Style||Nutmeg Fee||Fee Beyond £100k||Fund Costs||Martket Spread||Total|
Let’s break down exactly what each of these fees are:
These are the fees Nutmeg charges to use their platform. Nutmeg has a simple fee structure. For their managed portfolios you pay 0.75% up to £100k and then 0.35% on anything above that amount. Their fixed allocation fund is slightly cheaper at 0.45% up to £100k and 0.25% after that.
Investment Fund Fees
As well as the platform fees, you will have to pay underlying fund fees. These are the fees charged by the funds Nutmeg is investing in.
Fund fees on Nutmeg range from 0.21% to 0.36% depending on the type of investment style you choose.
Smart alpha and socially responsible funds have considerably higher fees than fully managed and fixed allocation funds.
Market Spread Fees
Another fee you will have to pay is the market spread fee. These are essentially transaction costs. It’s the difference between what someone is looking to sell an asset for and what someone else is willing to pay for it.
The fee on Nutmeg is the same for all types of investment styles. You will pay 0.04%.
When investing with Nutmeg you will be paying all 3 of these fees:
Nutmeg Platform Fee + Underlying Fund Fee + Market Spread
The cheapest option to go with is a fixed allocation fund not focused on being socially responsible. With £10,000 invested you would pay a 0.7% fee in total.
If you choose the smart alpha funds by J.P. Morgan you will be paying the most fees, coming in at 1.15% in total.
Personally, I would stick with the fixed allocation funds and lock in the cheaper fees.
Nutmeg Portfolio Performance
Below you can see the performance of the different portfolios and investment styles available on Nutmeg.
Fully Managed Portfolios Performance
In the fully managed funds, we can see a clear correlation between risk and results. The higher the risk of the fund, the better it has performed. This is due to a higher exposure to equities in the higher-risk funds. Over the past 10 years equities have performed extremely well especially when compared to bonds, commodities, and cash.
|Risk Level||Last 12 Months||Total Returns (Last 10 Years)||Average Yearly Return (10 Years)|
Fixed Allocation Portfolios Performance
For the fixed allocation portfolios, we only have data going back 3 years. Overall these 3 years have been pretty good in terms of overall market returns. The Low and medium-risk portfolios have performed poorly compared to the market. The higher-risk funds have performed much better delivering 7.8% and 11.7% returns per year for the past 3 years.
|Risk Level||Last 12 Months||Total Returns (Last 3 Years)||Average Yearly Return (Last 3 Years)|
Socially Responsible Portfolios Performance
Nutmeg has 10 portfolios to choose from in their socially responsible investing style. The portfolios trend very similarly to the Actively managed and Fixed allocation funds. The low-risk portfolios are performing poorly with only the highest-risk portfolios delivering good returns.
|Risk Level||Last 12 Months||Total Returns (Last 3 Years)||Average Yearly Return (3 Years)|
Over a 20-year time horizon, less than 10% of fund managers beat the market. For this reason, we personally like the fixed allocation funds with cheaper fees. We can also see that out of all the portfolios, the highest-risk fixed allocation fund has performed the best.
The problem with the low-risk funds is that you miss out on bull market rallies. The market has consistently risen over the past decade. By allocating your investments towards risk-averse assets, you miss out on these runs. If we were in a down market, the low-risk funds would likely lose a lot less money than the high-risk funds but they also don’t grow when the market is running up.
If you are early in your investing journey, you will get better returns over the long term by being invested in equities. If you are at the tail end of your investing journey and plan to retire soon being in these low-risk funds makes sense. The main focus at this stage is preserving your wealth rather than growing it.
The socially responsible portfolios seem to track within ~1% of the actively managed portfolios. By investing in these portfolios you do seem to be losing some returns. However, from an ethical standpoint, you may be willing to accept the slightly lower returns.
Nutmeg Portfolio Breakdown
When investing your money it’s important to know where your money is being allocated. Nutmeg offers a very transparent look at its portfolio breakdowns. On the Nutmeg site, you can view each portfolio and see a breakdown of the funds and bonds your portfolio is invested in. I like this level of transparency as many of Nutmegs competitors won’t show you the actual funds you are invested in.
The high-risk portfolios allocate the majority of your investment towards equities. In the level 10 high-risk fund, 89% is allocated towards developed market equities, 8% towards Emerging market equities, and 3% towards global equities. Only 0.37% of the portfolio is held in cash.
The low-risk portfolio holds 42% in Developed markets government bonds, 28% in the money market, 19% in corporate bonds, 8% in developed market equities, 1.75% in Global equities and 0.87% in cash.
You can check out all of the portfolios and allocations here.
Nutmeg has 3.7 stars on Trustpilot which is a reasonable rating for a financial website. 69% of the reviews come in at 5 stars while 15% of reviews come in at 1 star.
The main complaint in the negative reviews is about poor investment performance. As we have seen from the portfolio performance above many of the lower-risk funds have performed terribly over the past 5 years with some even delivering negative returns.
Positive reviews talk about great customer service and how easy it is to get someone on the phone to fix any problems that arise.
Is Nutmeg Safe?
Nutmeg is a well-recognized digital wealth management platform in the UK, regulated by the Financial Conduct Authority (FCA). Like all investment platforms, investments made through Nutmeg carry inherent market risks, meaning the value of your investments can go up as well as down.
However, from a regulatory and operational standpoint, Nutmeg adheres to stringent standards set by the FCA, which aims to ensure the protection of consumers, market integrity, and competition. It’s crucial for investors to conduct their own research, understand the associated risks, and consider their own financial situations and goals before investing with any platform, including Nutmeg.
Nutmeg Vs The Competition
The biggest competitor to Nutmeg right now is Moneyfarm. Let’s see how they stack up when it comes to fees and performance. If you want to get into a deeper comparison of both platforms check out our take on Nutmeg vs Moneyfarm.
While past performance is not a guarantee of future performance it’s a good indicator of successful funds over long periods of time. Let’s take a look at how both of these funds have performed over the past few years.
These numbers are based on the actively managed funds at both providers.
|Risk Level||Moneyfarm 5 Year Returns (Total)||Moneyfarm 5 Year Return (Yearly Avg)||Nutmeg 5 Year Returns (Total)||Nutmeg 5 Year Returns (Yearly Avg)|
RETURNS OVER THE PAST 5 YEARS – TO DEC 2022
Low risk relates to each provider’s lowest-risk fund. Medium relates to their middle fund and high relates to their highest risk fund.
Moneyfarm outperforms Nutmeg in both the medium and high-risk funds but lost more in the low-risk fund. Both companies’ low-risk funds performed horribly over the 5 year period losing money.
Moneyfarm performed significantly better with their medium-risk fund (10.6% vs 3.6%) and only marginally better with the high-risk fund (25.5% vs 24.09%).
Overall Moneyfarm has performed better than Nutmeg based on returns over the past 5 years.
Both Moneyfarm and Nutmeg have similar fee structures. Just like we broke down above, there will be a platform fee, fund fee and spread fee. On both platforms, the fund fees are very similar. The main difference is with the platform fees on both platforms. Let’s look at them side by side.
Actively Managed Fees
PLATFORM FEES ON MONEYFARM & NUTMEG
Fees are much cheaper on Moneyfarm than Nutmeg. With Moneyfarm, you will be charged a fee based on your total balance. For example, if you have £100k in your account, you would be charged 0.45% of the total amount. However, with Nutmeg you are charged on a tier basis. Everything in your account up to £100k will be charged at 0.75% and everything after £100k will be charged at 0.35%.
For most people, Moneyfarm will work out much cheaper than Nutmeg.
Fixed Allocation Funds
Both platforms have fixed allocation products which means the portfolio is not actively managed and only gets rebalanced once a year. The fees on these are cheaper than actively managed products.
|Up To £100k||0.45%||Up to £100k||0.45%|
|£100k to £250k||0.35%||£100k+||0.25%|
|£250k to £500k||0.30%|
PLATFORM FEES ON MONEYFARM & NUTMEG
Up to £100k both platforms have the same fee. Nutmeg is 0.1% cheaper for users who have a balance of £100k to £500k.
Overall we think Moneyfarm is a better choice for most people. They have significantly better performance in their medium and high-risk funds. They also have better fees on their actively managed portfolios and very similar fees on Fixed allocation funds.
Who Should Use Nutmeg
Nutmeg is a good app for beginner investors looking to passively invest without having to manage their own portfolios. However, in our opinion, it isn’t the best option out there for a digital wealth manager. We would recommend checking our Moneyfarm which has better fees and performance.
Moneyfarm is one of the UK's premier digital wealth managers, dedicated to simplifying investments and helping individuals grow their assets. Providing innovative investment solutions, Moneyfarm focuses on delivering tailor-made portfolios based on individual risk appetites and financial goals.
Overall Nutmeg is a great, easy-to-use platform which I think is a reasonable option for new investors. It allows you to get started investing without the overwhelmed feeling of trying to pick your own funds and stocks. For investors who want a set-it-and-forget-it investing option, Nutmeg is a reasonable choice. However, I do believe Moneyfarm is a better option due to its cheaper fees and better portfolio performance for higher-risk portfolios.
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