UK-based online investment management firm Nutmeg has widened its losses by more than £6m in 2018 following an increase in marketing costs.
Operating losses expanded from £12.3m to £18.6m despite an increase in turnover to £7.2m from £4.6m in 2017. Operating expenses have also increased by a third to £22.7m from £17m the previous year.
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A third of Nutmeg’s costs were allocated to marketing in 2018 as the company increased its customer numbers to 85,000 from 50,000 in 2017.
Increased costs were also associated with the introduction of financial advice. Nutmeg announced that it would be rolling out personalised investment advice in October last year. This has increased throughout 2019 as users of the platform demand both regulated and un-regulated advice in using its services.
The wealth manager has not yet made a profit, but Nutmeg chief executive Martin Stead expects that to change within three years.
Stead told the Financial Times, “It wasn’t part of our business plan to be profitable yet. My aim is to have operational profitability [by] our 10-year anniversary.”
In an investor update, Nutmeg investment manager James McManus said after a difficult August, all portfolios performed positively in September, with returns ranging between 0.45% at the lower end of the risk spectrum up to around 2% at the highest risk level portfolios.
The typical medium-risk Nutmeg portfolio has exposure to about 7,900 underlying securities.
Can Nutmeg stem losses through global expansion?
With over £1.5bn in assets under management, Nutmeg is the UK’s largest online wealth manager. But in the past year the firm has made moves to expand overseas.
In April this year, Nutmeg announced it first foray into Asia with a strategic partnership with Taipei Fubon Bank.
Fundraising efforts have also come from abroad. In January this year, Goldman Sachs invested £45m in the firm, which it said would be put towards international expansion and new products and features.
Then, in March, Nutmeg turned to crowdfunding to raise an additional £10m, something it said would “democratise company ownership”.
