Nutmeg’s recent purple patch was widely reported upon last week: the wealth manager sold a £24m ($30m) stake to Convoy, an independent financial advisory firm based in Hong Kong, right after their £30m ($37m) funding round.
Many see it a step forward for the fintech industry in a post-Brexit world. Even chancellor of the exchequer Philip Hammond got excited by the prospect, and affirmed that “it is an industry which is going from strength to strength and today’s announcement confirms the UK as the global fintech capital”.
However, not everyone is as positive about the London-based fintech. “Nutmeg is nothing special in technical terms, pretty unsuccessful in attracting clients and mildly embarrassing for backers who have already invested more than £50 million in it,” wrote Anthony Hilton for the Evening Standard.
Nutmeg was founded by Nick Hungerford, who left the organisation earlier this year to build a fund management firm that allows retail investors access to investment knowledge from the best fund managers. According to the ES, he made Nutmeg happen but after major losses, the “board eventually lost patience and Hungerford was removed as chief executive”.
Alan Miller of investment manager SCM Private is incredulous about the mechanism underpinning platforms like Nutmeg, Hilton continued. In a series of blogs, Miller has questioned whether robo-advisors would make money, the ES article said: “The whole thing reminded him of the insane optimism for technology at the time of the dot-com boom 16 years ago.
“The nub of Miller’s argument is that a new firm with no brand name and no pedigree has to spend too much money acquiring customers, and that makes the whole business unviable,” the ES reported.
Hilton spoke about loyalty and how clients will only stick around until they break even because they are new to investment and the brand name means so little that they shop around, ‘they’ being millennials.
“One can see why Hammond wanted to flaunt the fact that post-Brexit Britain was open for business. Shame the business he chose is loss-making, and likely to remain so for quite some time,” the article concluded.
The Convoy buy could ensure success for Nutmeg as group president Ng Wing Fai highlighted that they are interested in the fintech’s “mission to democratise wealth management”.
The Financial Times explored how the Nutmeg deal is one of the largest to be announced in Europe since Brexit, as managing director of Magister Advisors, Victor Basta, said. Basta added that this was indicative of the trend that is emerging where Asian investors are backing the best European tech assets. “Nutmeg is without questions the largest and most mature business in its sector in Europe,” he said.
“At a time when there are concerns about the impact of Brexit, here is a London-based business engaged in dynamic fintech innovation and attracting global investors.”
It could be said that Asian investment is the reason why European fintechs have lasted this long and Basta predicted that the value in investment this year will be ten times more than it was in 2013.