Nutmeg’s numbers for 2015 are out, and make fascinating reading for anyone interested in this part of the market. Here are the basics: That is challenging reading. Nutmeg is five years into its journey, and its revenue is still at the level many adviser firms would recognise from their own businesses.
Operating expenses are high, headcount is high, and it either has to up revenue very quickly in 2016 or it will need reinvestment soon. In truth, both will probably be required.
Robo-advice
So that’s a reality check for anyone thinking that robo-advice is a way to get rich quick. But it’s not what matters to us today. Nutmeg made big strides in 2015. Its customer numbers were up by more than 50 per cent, AUA by more than 100 per cent and AUA per client is up more than 35 per cent.
Even with that, we calculate that its CPA is near enough £1,000 per client (if you want to see our numbers give us a call). We could be wrong by half, and it would still be £500 per client, and that’s just too much.
We’re looking at a world in which a fintech business needs clients to hang around for anything from seven to 13 years to make itself profitable. That, too, is just too much. And if Nutmeg starts to wobble (we expect and hope it will be fine) then the shockwaves round the robo-advice market will be remarkable.
The real message in here is that whether you’re making phones, running a massive insurance company or a fintech startup, you can’t take your eye off any element of what’s going on.
When you ask people to interact remotely with intangible services, you need to think very carefully about what the constituent elements of trust are and keep your focus on them. We don’t need a Note 7 in our space, thanks very much.
Mark Polson is principal of platform and specialist consultancy the lang cat
