Tech interview: Rise of the robo-adviser

Funds Europe talks to Nutmeg’s CTO, Matt Gatrell, about the role of technology in its online offering.

When UK-based robo-adviser Nutmeg published its 2020 results earlier this year, there were some significant milestones within the financials. Assets under management (AuM) exceeded £3 billion (€3.5 billion), while the client base grew to 130,000, a 53% increase from the firm’s Q1 figure.

Since then, assets have grown to more than £3.5 billion and in June, it was announced that Nutmeg had been acquired by JP Morgan to form the basis of its digital wealth management offering outside of the US. The deal is still pending regulatory approval, which is expected to come through before the end of the year.

We talked to Nutmeg’s chief technology officer and board member, Matt Gatrell, about the demand among investors for digital platforms, helped by the pandemic and the advantage that digital upstarts have over their traditional rivals.

How significant is the £3.5 billion AuM mark?
When Nutmeg was founded in 2012, there were plenty of critics that said the model wouldn’t work and the business couldn’t offer retail investors something they wanted. Less than a decade later and we’re managing in excess of £3.5 billion on behalf of over 140,000 retail investors in the UK – and growing at a rapid rate. The milestones are significant for what they represent in an industry that desperately needed the change that Nutmeg has led – high-quality investments and wealth management services are now available to a much broader range of people.  

How has the move to online platforms during the lockdown contributed to Nutmeg’s growth in the last 18 months?
Digital adoption has certainly accelerated during the last 18 months as a result of a number of factors coming to the fore at once. First, everyone’s financial outlook has changed as a result of the pandemic and lockdowns – whether you have been impacted by furlough, reduction in salary or redundancy, or you’ve been fortunate to have maintained your income level but seen your expenditure drop – the way we think about our finances has changed. 

Second, people have had more time to consider their financial goals, organise the savings and investments and put into place plans for their future. Third, technology-led services, like Nutmeg, have thrived. On March 16, 2020, our team of engineers, investment managers, client services agents, wealth advisers and the rest moved to remote working, and on March 17, the business operated completely as it had done for the years before.

Clients were reassured they could still speak to our team, monitor their investments, make deposits. Not all businesses were able to offer this reassurance to their clients and some, who may have seen technology as a nice-to-have, now saw it as core to the client need.  

Do you see this trend continuing post-lockdown?
Yes, is the short answer. We’ve seen some changes in the financial behaviour of clients over the last 18 months – many who were fortunate to have more disposable income have increased their monthly deposits or made large ad hoc investments, often stating the desire to build a bigger financial buffer should the unexpected happen in the future. 

We have clients who are self-employed and seen their income almost completely cease, who’ve needed to access their money, now looking to rebuild their rainy-day funds. Perhaps most encouraging, we’ve seen significant growth in investors aged between 24 and 34 who want to build more stable financial futures.  

Other digital platforms/robo-advisers have quit the UK market recently (e.g. Scalable Capital), arguing that it is overcrowded. Do you think it is?
The retail investment market in the UK has certainly developed in recent years and we’ve seen increased appetite from consumers looking to invest, which we think will continue to grow. 

What is key is offering retail investors solutions that meet their needs. We believe that we offer investment and wealth management services that meet a wide range of client needs, which we also see in the diversity of our clients – we’re offering seasoned investors investment and wealth management services at a much lower price than traditional providers, as well as an intuitive and straightforward service for first-time investors.  

How would you describe Nutmeg’s technology infrastructure?
Our technology infrastructure allows us to improve our clients’ experience of Nutmeg by focusing on solving the essence of the problem rather than merely dealing with the symptoms. The engineering teams work to ensure a seamless client-centric approach from end to end – by that, we mean from the clients’ experience of our mobile apps or website through to the payment process or trading and fund allocation.   

How has this set-up given Nutmeg an advantage over traditional asset managers that may use more legacy technology?
Speed to market and adaptability are among the key benefits of our technology infrastructure. We’re continually testing and speaking to clients about developments and enhancements that they want to see from us, and the agile, iterative approach we have allows us to deliver enhancements more quickly.  

What plans does Nutmeg have to develop its technology?
You can’t be a leading digital wealth manager and not develop your technology. Technology will always evolve, with enhancements that continually improve the client’s experience. We’re always working to ensure our clients have the best experience and that our technology not only meets their needs but exceeds their expectations.  

Does Nutmeg work with third-party tech vendors and is any of the technology developed in-house?
All of our core intellectual property and technology is built by our in-house team of engineers. We believe that gives us a competitive advantage over our competitors We do integrate with third-party tech vendors where we have a need outside of our core offering. The combination ensures we can move quickly to market with new features, gives us more control of our technology roadmap, and ensures our engineers are spending their time on what is most valuable and important to our clients. 

Does Nutmeg have any plans to broaden into the institutional investor market (pensions funds, etc)?
Our main focus at the moment is the retail investment market. This is a market that has traditionally been poorly served and we believe we have something valuable to offer people, whether directly through or via strategic partnerships, such as the recently launched John Lewis Investments.  

Do you see more traditional asset managers (like the newly branded abrdn, for example) moving into the retail and online wealth platform space? Are the lines blurring between the two markets?
We can certainly understand the appeal of the retail market for traditional asset managers. It’s a large market and consumer sentiment around investing is shifting. So, we can certainly understand the appeal of moving into the space, however, as some providers have seen, the move from institutional to retail may not be as easy as they think.

This article first appeared in Funds Europe’s sister magazine FundsTech.

© 2021 funds europe



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