Nutmeg was founded in 2010 and is the UK’s first online discretionary investment management company. Nutmeg’s objective was to provide, online and direct to investors at a low cost, a user-friendly and transparent discretionary fund management service.
Customers can easily access the service, create any number of personal funds, and determine their initial and monthly contributions to each. They then have unrestricted access to their investments, and can top-up, withdraw or transfer funds at any time.
Nutmeg builds portfolios appropriate to each investor’s circumstances and specific goals, based on five fundamentals: Expertise, Simple fees, Personalisation, Transparency, and Respect.
Risk Profiling Content: Nutmeg’s previous fact-find may not have revealed the most meaningful profile for an investor, and thus needed improvement to match existing best-practices. Pertinent issues such as capacity for loss were not explored sufficiently to be of benefit to the investor, or to satisfy potential regulatory requirements.
Risk Profiling Process: The placement and presence of various steps in risk profiling process needed revision, to ensure that results would not be biased, or that they could be too obviously manipulated.
Suitability: Nutmeg required a process to empirically, and thus consistently, align investor profiles with suitable investment solutions.
Oxford Risk delivered an initial 14 question risk tolerance assessment for Nutmeg, alongside methodology to adequately categorise investors into risk profiles, taking into account willingness to take risk, composure and knowledge & experience. Implementation support was provided to Nutmeg’s design and customer service teams, ensuring communication and engagement best practices were used to deliver the most effective interaction. Delivered a yearly suitability analysis, that tests the preference within in risk tolerance category for the range of 10 offered Nutmeg portfolios. The analysis takes expected performance into account, as well as changes in preferences across time horizons. Oxford Risk continue to work with Nutmeg and calibrate their existing risk profiling instruments periodically.
Nutmeg now has a risk profiling process that would match the existing obligations on face to face advisers, and are thus able to provide a stronger and more meaningful engagement than other players in their sector. The detailed output from the risk profiles, particularly the suitability analysis, combined with the implemented engagement best practices when discussing risks/rewards, has enabled Nutmeg users to understand more about their preferences and relative willingness to take risk, so that they can make an informed investment decision.