Some rather large news broke in the UK robo-advice world in June 2021 as the UK’s biggest robo-adviser, Nutmeg, was bought by JPMorgan Chase, which is the retail bit of the huge US bank JPMorgan. Nutmeg is the oldest robo in the market and has more than 140,000 customers. If you’re a Nutmeg customer already, or maybe you’re thinking of joining, you might be wondering what this news means for you.
Testing the water
We reviewed Nutmeg relatively recently in 2019, but that now seems like a very long time ago. It burst on the scene by offering an alternative to face-to-face financial advice and using snazzy algorithms to recommend and manage investments. Since that review, Nutmeg has added a Junior ISA to its product range and launched a new range of ETFs and portfolio service called Smart Alpha in partnership with JP Morgan Asset Management.
With hindsight, it looks as though they were testing the water to see how well JPMorgan and Nutmeg work together. Obviously, the project worked as they’re now getting permanently hitched and Nutmeg will be wholly owned by JP Morgan.
On the face of it, it’s come at the right time for both. JPMorgan Chase is launching a new digital bank in the UK at the end of the year. The bank has been present in UK and touting consumer and retail banking services for mass-affluent customers in the UK for many years, but never really gained any traction. Meanwhile, Nutmeg, the first robo to launch in the UK, has the most customers of any robo-adviser, but is yet to make a profit. They need each other, basically.
What does it mean for Nutmeg customers?
In the short term, probably not a lot. These things take time to unfold. But we do enjoy speculating on what might happen…
If you’re a Nutmeg customer, you might see more portfolios added that feature JP Morgan to some extent. Also, as JPM Chase is launching a UK bank you might see closer links or even priority access to its retail bank accounts (though JPM Chase has said Nutmeg products won’t be available through its bank from the off). On top of that, you might see charges come down on Nutmeg’s portfolios as more people invest in them.
The potential sticking point for existing Nutmeg customers is that their ethos is likely to be different from JP Morgan’s. Nutmeg’s mission was to get people, typically younger people, investing for the first time and open investing up to everyone. And it’s been successful in that. It’s app and website-based, so you don’t have to call if you don’t want to. You can invest with relatively little money, whereas in the past with traditional wealth managers you’d need a hefty chunk to even get started.
Nutmeg also has ethical investing options, so you can invest in industries that help fix the world and avoid stuff like fossil fuels, weapons and the like. If this is important to you (as it often is for younger people), you might already know that JPMorgan has been in the bad books for that. It’s the world’s largest financer of the fossil fuels industry. And despite saying it would align its business model to the Paris Agreement in 2019, JPM was still the largest financer of fossil fuels in 2020, to the tune of US$51.3bn.
Rub of the green
JPM has stated that it’s committed to achieving net-zero greenhouse emissions through its financing by 2050, but that’s a way off yet. I’ll be thinking about my retirement plans by then and I’m in Nutmeg’s target customer range. However, that doesn’t mean that Nutmeg won’t be a big part of its journey there.
How big a deal this is to you will likely be on a spectrum, some customers will be satisfied to be included on the journey between JPM Chase and Nutmeg, and some will be deterred by the seemingly opposed business values. But what’s important, as ever, is to take what’s written here with what you can find out yourself to help you to make an informed decision.