Nutmeg anyone?

jimjames

bigfreddiel wrote: »

So nutmeg made a loss. Does it matter?
So just because nutmeg made a loss is of no consequence.

Cheers fj

I know from your previous posts that you're vehemently anti-ifa but I think it's useful information to know if a company you're putting money with has a sustainable business or not. Maybe they have the funding to make a loss for a few years and build business but to make a loss 10x more than your income wouldn't fill me with confidence that they'll still be around in 10 years time.

slowpoke_rodriguez

bigfreddiel wrote: »

So nutmeg made a loss. Does it matter?

Banks make huge losses but you still trust your money with them!


Cheers fj

Not £250k I don't!
Any more than the £75k protected get's farmed out elsewhere. Even then, if the bank went tits up the protected bank deposits would take a few months to be reimbursed. Been there, done that. Mum went to Iceland. It wasn't fun!

Trust a bank with your money? Up to a point.
Trust a bank with all your money? No way!
Same goes for brokers, fund platforms, Nutmegs etc.

dunstonh

So nutmeg made a loss. Does it matter?

Of course it matters. Financial strength is one of the key things you look for.

So just because nutmeg made a loss is of no consequence.

A loss making year is not a problem in isolation. It has never turned a profit and the losses are increasing annually. The business model is such that it will make losses in the early years as it is attempting to tap into a new market. The problem is whether the success comes before the money runs out.

in 2012, it lost £1.8 million. In 2013 it lost £3.6m and in 2014 lost £5.8m

The turnover in 2013 was just £103,903. So, it is doing well to grow its turnover but its losses are growing. It moved the number of customers from hundreds to the thousands. Again, progress. However, how long will its backers pour money into it before calling it a day. Will they hit the critical point before then?

Whilst slightly different, we you have just one platform go under and at least another 3 are in strategic review or up for sale. The area is not turning out to be profitable and the backers of those platforms feel the money is better off being spent elsewhere.

masonic

bigfreddiel wrote: »

Use nutmeg to suggest the funds that suit your risk tolerance, and then just set your own portfolio up based on that.

I don't think it is quite as simple as that. Nutmeg uses ETFs (which are too expensive in terms of trading/rebalancing costs for most people). This is probably why their portfolios seem to underperform.

The OP should look into Vanguard Lifestrategy, or L&G Multi index. These have better track records and are much cheaper to hold.

bigfreddiel

jimjames wrote: »

I know from your previous posts that you're vehemently anti-ifa but I think it's useful information to know if a company you're putting money with has a sustainable business or not. Maybe they have the funding to make a loss for a few years and build business but to make a loss 10x more than your income wouldn't fill me with confidence that they'll still be around in 10 years time.

I'm not anti ifa, just anti their huge fees and lack of clarity, of course not all of them, but it only takes one bad apple to spoil it for the rest.

This is endemic in the finance world.

For example Wellesley promising 6% return over five years. Big headlines in their add looks fantastic, hold up tho!

Did you spot the tiny fuzzy info st the bottom of the screen, barely legible on my hd 50" tv. Take a read next time you see the ad.

Cheers fj

bigfreddiel

dunstonh wrote: »

Of course it matters. Financial strength is one of the key things you look for.


A loss making year is not a problem in isolation. It has never turned a profit and the losses are increasing annually. The business model is such that it will make losses in the early years as it is attempting to tap into a new market. The problem is whether the success comes before the money runs out.

in 2012, it lost £1.8 million. In 2013 it lost £3.6m and in 2014 lost £5.8m

The turnover in 2013 was just £103,903. So, it is doing well to grow its turnover but its losses are growing. It moved the number of customers from hundreds to the thousands. Again, progress. However, how long will its backers pour money into it before calling it a day. Will they hit the critical point before then?

Whilst slightly different, we you have just one platform go under and at least another 3 are in strategic review or up for sale. The area is not turning out to be profitable and the backers of those platforms feel the money is better off being spent elsewhere.

Hmmmm. Interesting, but take a look at Amazon, it's never made a profit despite huge ever growing investment.

And of course all our usual favourites making huge losses.

Cheers fj

BananaRepublic

Looking at Nutmeg's estimated returns, they reckon on abut 4.5% pa, for their medium risk portfolio, which seems rather modest, if not mediocre. You can easily work out what you could have got from assorted trackers, and active funds, over the last 10 years. It gets harder to get performance figures beyond 10 years. Don't take the comparison too seriously, but it'll give you some rough figures to think about.

bigadaj

I had a quick scan of nutmegs website. Fees look similar to an ifa but they claim that fund costs, probably etfs as noted above are on average 0.19%, which seems low even if a composite if trackers are Being used.

xylophone

https://forums.moneysavingexpert.com/discussion/comment/69522367#Comment_69522367

Post 2 - any answers OP?

bowlhead99

masonic wrote: »

The OP should look into Vanguard Lifestrategy, or L&G Multi index. These have better track records and are much cheaper to hold.

While the 'much cheaper to hold' is indisputable, it's perhaps quite difficult to say Nutmeg or other robo-providers have 'underperformed' when they only have 3.5 years of track record and their view of 'risk category 1-10' probably doesn't map exactly to a Multi-index number or a Vanguard equities percentage and the allocation appears to be more fluid than Vanguard at least.

Really, the lack of track record and non-availability of info on what they chose to hold in what part of an economic cycle is one of the most offputting things. If you were DIYing you would want to know that history. But I suppose you don't need to question it if you just abandon all attempts at evaluation because you are using them to save you the thinking, and pay them to be able to trust them to get it right.

To me, that would be a bit of a leap of faith ; it's a 3 year old not-profitable firm - and the people who use it from whom you might get reviews, are perhaps NOT likely the kind of people who understand investments amazingly well. Otherwise they'd just DIY. As such, the typical review found online (beyond the newspaper article puff pieces) will probably not have much in the way of incisive critical evaluation of the service received other than 'yeah, seems good, I've made money' which ignores the fact that most mixed asset portfolios have made money in recent years.

bigadaj wrote: »

I had a quick scan of nutmegs website. Fees look similar to an ifa but they claim that fund costs, probably etfs as noted above are on average 0.19%, which seems low even if a composite if trackers are Being used.

The 0.19% could be about right. On one of their pages they give examples of the ETFs they use.

Vanguard's S&P500 ETF is only 0.07% while HSBC's is 0.09% (just like Vanguard's FTSE100). The others will all be more or much more expensive than that: SPDR long dated Gilts are 0.15%; Vanguard emerging markets is 0.25% ; Powershares Nasdaq is 0.3%, iShares have loads: UK Corporate Bond or short term Gilts is 0.2%; US Smallcap 600, or Europe ex-UK, or Eurostoxx midcap or UK Property all at 0.4%; US TIPS or Emerging Markets Bond is 0.45%; Global Infrastructure, Water, or Timber & Forestry is 0.65%, Korea is 0.75% etc etc

Based on the fact that the more aggressive portfolios will have lots of S&P500 and some home bias FTSE stuff at super low prices, and the UK gilts and corporate bonds are only 0.15-0.2%, then feasibly they could hit 0.19% because the Korea and Brazil funds with their high costs are not going to make a large part of the portfolio. Still, you can bet that the ten different portfolios don't all have the same cost and they probably just picked the one that scraped in under 0.2% to declare as 'typical'.

Apparently, you don't pay for trading costs (though how would we know if they were just absorbed into the net returns, given we don't know exactly what is held every second of the year...) but perhaps this is afforded out of the management fee of 0.3-0.9%.

For someone who 'only' has £25,000 to £99,999 with them, annual fees are 0.75 plus about 0.2% for the ETF TERs, so 0.95% all in. A multi-asset fund for maybe 0.25% to 0.7% plus 0.2% platform fee would obviously undercut that. But by 'DIYing', you would be missing out on them telling you which of the 1-10 risk categories you fit into, and would have to decide for yourself and identify/research the suitable fund yourself.

It gets cheaper at higher prices, but then, so do IFAs. Pretty sure most real IFAs upfront plus annual would not beat an all in 1% on £25k or even £100k (£250-£1000) but you would be getting a tangible 'something' for your money - a real human being who can actually react to your questions and concerns in real time. With a £250k portfolio you have the ability to buy more hours of 'real IFA' time before it becomes a large relative cost on the portfolio.

While dunstonh makes a very valid point about financial stability and longevity of the provider being important there are more and more services 'going Robo'. RBS making layoffs to do just that is one such example announced in recent weeks, and Goldman's announcement in the last couple of days that they bought Honest Dollar (a US startup financial tech company that helps small businesses set up robo IRA retirement plans for staff) means that big money is being spent in this arena. Venture capitalists and existing industry players can stomach quite a lot of years of £10m+ losses while they build a customer base waiting for a big money buyout. As freddie says, Amazon did just that and became ubiquitous.