These firms are often called ‘robo-advisers’ because they help you to get started with investing by harnessing technology. They are popular with investors who lack the confidence to choose their own investments, but who don’t want to pay for bespoke financial advice. They both build and manage a portfolio of suitable investments on your behalf. But the level of guidance and investment ranges differ so your choice may not simply come down to the costs of investing.
What is Nutmeg?
Based in London, Nutmeg is an online discretionary investment management company that was founded in April 2011 by Nick Hungerford and William Todd. ‘Discretionary’ means that it makes investment decisions on behalf of its customers, building and managing diversified portfolios for them, rather than providing a platform for people to buy and sell investments. Nutmeg claims to set up your portfolio in under 10 minutes, and uses technology to keep charges low and show where you’re invested. Nutmeg portfolios are almost entirely made up of low-cost exchange traded funds. The company was bought by US bank JP Morgan Chase in 2021 in a deal valuing it at £700 million. It now has over £5 billion in assets under management on behalf of 230,000 investors.
What is Moneyfarm?
Moneyfarm launched in the UK in 2016, after running a similar service in Italy since 2011. The firm helps customers to get started with investing by harnessing technology. After you spend a few minutes filling out an online questionnaire, it matches you to suitable investment portfolios that it builds and manages in-house. The firm also has expert investment consultants to advise customers who need extra help, and an asset allocation team who actively manage its portfolios. It has financial backing from some big firms, including Allianz Global Investors, M&G, Cabot Square Capital, United Ventures, and Poste Italiane. On a pan-European basis, the firm has over 125,000 active investors and more than £3.5 billion invested on its platform.
Nutmeg v Moneyfarm – product on offer
With both firms you can invest using tax-efficient wrappers such as Individual Savings Accounts (ISA), Junior Individual Savings Accounts (JISA), Pension and General Accounts. Nutmeg also offers a Lifetime ISA, which may give it the edge if you’re aged 18–39 and therefore eligible to have one.
Moneyfarm allows you to get started investing with a minimum lump sum of £500. Nutmeg’s minimum investment is also £500 for ISA, general investment and pensions. But Nutmeg lowers this to £100 for Lifetime ISAs and Junior ISAs, which you may find helpful if you’re under 40 or a parent.
Both firms’ investment teams select and manage your chosen portfolio using exchange-traded funds (ETFs) as low-cost building blocks. ETFs are a type of investment fund, listed on stock exchanges, which replicate the performance of a pool of investments or an index.
However, the range of investments and guidance routes to selecting investments differ.
Moneyfarm’s smart tech uses your bespoke investor profile, generated using an online questionnaire, to recommend the best portfolios for your investing style and appetite for risk. The Moneyfarm questionnaire is quite detailed which means if you’re a complete novice you might find it a bit complicated. However, there is always the option to speak to one of the firm’s designated investment consultants for free, with a 15-minute call back time, or a slot selected at your convenience.
Moneyfarm offers a choice between actively managed, fixed allocation and liquidity+ portfolios. Its actively managed portfolios benefit from constant monitoring to make sure your investments are working hard, dividends are being reinvested, and are performing their best every day. With fixed allocation, your investments follow the markets, meaning there are lower costs for investing. Liquidity+ portfolios are designed for shorter-term investment goals of two years or less. Moneyfarm’s guidance questionnaire process selects one of these but also selects from seven risk levels, with socially responsible and thematic investment options also available.
Moneyfarm also offers Share Investing accounts where you can pick your own investments in individual companies’ shares. This option is available within its Stocks and Shares ISA and General Investment account.
With Nutmeg, it’s more accurate to say your money is managed by a mix of technology and human decision-making. Nutmeg has a greater number of risk levels and investment options. Its range is based on five investment styles, that also use ETFs to diversify across stocks, bonds, industries and countries. But you have to choose the style and risk level by yourself. Nutmeg admits that the “robo” bit refers to the technology it has built to trade and manage the investments in your portfolios.
Nutmeg’s Fully managed and Socially Responsible portfolios are monitored on a daily basis, while its cheaper Fixed Allocation portfolios are designed to perform without the intervention of Nutmeg’s investment team. Nutmeg’s more recent launches are Smart Alpha portfolios, managed by parent company JP Morgan Asset Management using a unique set of ETFs, and Thematic investments, targeting the growing trends shaping our future.
Within the Fully Managed and Socially Responsible options you choose between 10 risk levels. Thematic investing is only available for risk level 5 and above. Fixed Allocation and Smart Alpha both offer 5 risk levels.
Nutmeg offers a 10-page detailed pdf guide to explain how to choose between all of this but, even so, you might find it difficult to choose if you’re an absolute beginner and lacking confidence. Even the Nutmeg guide states “We know this is a lot of information to digest.”
It’s difficult to compare investment performance exactly, with both firms showing investment track records on their websites. Overall, Nutmeg underperformed its peers in 2021 and 2022, and over the past 10 years. Moneyfarm’s track record goes back to 2016, showing its portfolios 1 and 2 underperformed peers but its higher risk 3-7 portfolios performed better.
On the average risk level investment option, Moneyfarm has performed better. Here, Nutmeg Fully Managed portfolio 5 v Moneyfarm Actively Managed risk level 4 feels like a good direct comparison. In 2022, Nutmeg 5 delivered average annual returns of -13% vs Moneyfarm 4 delivering -9.1%. Performance in 2021 was Nutmeg at 7.5% vs Moneyfarm at 8.8%.
With both firms you’ll pay a management fee based on the total value of your investments, with Nutmeg slightly more expensive on portfolios of £10k to £100k.
Moneyfarm’s actively managed portfolios start at 0.75% for investments under £10,000, and reduce on a sliding scale down to 0.35% for those with more than £500,000 saved. Its annual fees would be £70 on an investment of £10,000 and £1,750 on £500,000. Moneyfarm has lower fees for its Fixed Allocation portfolios, starting at 0.45% on the first £100,000 and reducing to 0.25% for investments over £500,000.
Nutmeg’s management fee is 0.75% up to £100k and reduces to 0.35% on the portion beyond £100k. But if you choose its Fixed allocation investment style, the management fee starts at 0.45% on the first £100k and is 25% on the portion beyond.
On top of these management fees, you have to pay the ongoing fees attached to the funds. With Moneyfarm, these average about 0.2%. Nutmeg’s start at 0.21% for Fixed Allocation, rising to 0.36% for Smart Alpha.
Nutmeg also offers a financial advice service for a one-off fee of £575 (including VAT), that will create a financial plan to help meet your goals. However, this is ‘Restricted Advice’ on its own range of portfolio services and investment and pension products, rather than full advice that looks across the whole investment market. Nutmeg’s financial advice service is designed to identify which Nutmeg products and investments might be appropriate for you given your financial circumstances and goals. You can also book a free 30 minute call with an expert before your sign up for this.
Nutmeg v Moneyfarm – research, tools and features
Moneyfarm has a good blog, with plenty of insights into the investment world provided by its chief investment officer and other writers. Topics include financial markets, economics, financial planning, retirement, pensions and tax. Plus, it has a few guides to help you get started and a pension calculator.
Nutmeg also has a good blog covering a range of financial topics and lots of guides for beginners. But Nutmeg has more tools and calculators, allowing you to calculate compound investment returns, plus returns from ISAs and pensions, and see how tax affects your investments.
Nutmeg v Moneyfarm – user experience
Customer reviews on consumer website Trustpilot give a good idea of overall customer satisfaction.
Moneyfarm has a ‘good’ rating of 3.9 out of 5 (based on over 1,000 reviews). Customers giving positive reviews often mention its easy navigation and accessibility. But a few feel let down by Moneyfarm’s customer service and investment performance.
Nutmeg has an ‘average’ rating of 3.6 out of 5 (based on over 1,700 reviews). Positive reviews praise the customer service and caring, professional staff, while negative reviews relate to investment performance and transferring money out.
Bear in mind that Moneyfarm asks its customers for reviews, but Trustpilot states it has no recent records of Nutmeg asking their customers to review them. Overall, businesses that regularly invite their customers to write reviews tend to have a higher TrustScore than businesses that don’t, which may account for some of the higher rating for Moneyfarm.
Meanwhile, if a decent app is important to you, Nutmeg may have the edge. The firm’s customers have praised it for responding to calls for better user experience and functionality. As a result, the Nutmeg app has a 4.8 rating on the app store (based on 15,600 ratings) v Moneyfarm at 4.6 (based on 1,700 ratings).
Nutmeg v Moneyfarm – quickfire advantages & disadvantages
Nutmeg advantages
- Higher app rating
- More portfolio risk levels to choose from
- Good tools and calculators
- Access to restricted financial advice if you need it
Nutmeg disadvantages
- ‘Average’ customer service score with Trustpilot
- More expensive on portfolios of £10k to £100k
- Investment choice potentially difficult
Moneyfarm advantages
- Good customer service score with Trustpilot
- Online questionnaire to help you make investment choices
- Designated free investment consultants if you get stuck
- Share investing account available
Moneyfarm disadvantages
- Doesn’t offer financial advice
- Fewer tools and calculators
Our conclusion
If you’re a complete beginner, Moneyfarm’s online questionnaire to help choose an investment for you, plus its free access to investment consultants, are likely a big plus. On average risk level portfolios, Moneyfarm has had better performance too. More experienced or confident investors might also want to take advantage of Moneyfarm’s share investing account.
However, if you’re under 40 and want to open a Lifetime ISA, you’ll have to go to Nutmeg, as Moneyfarm doesn’t offer one. Plus, Nutmeg’s better app, tools and option to pay for financial advice, may give it an edge.
If you still can’t decide then costs might swing your decision, with Moneyfarm cheaper on portfolios of £10k to £100k. Use Compare and Invest to find out what you’d potentially be charged for investing with each of these firms before making your final decision.
