JP Morgan has struck a £ 700 million deal to buy Nutmeg, the digital wealth manager, as America’s largest bank looks to push forward plans to build a consumer business in Britain.
The surprise move by the Wall Street financial services group comes ahead of the launch of its long-awaited online retail bank in the UK this year. Nutmeg will sit next to the new digital bank, which will begin offering a checking account to customers accessible via a smartphone app in the fall.
The deal will bring Nutmeg’s client base of 140,000 investors and more than £ 3.5 billion in assets under management to New York-based JP Morgan.
The investment platform is a so-called ‘robo-advisor’ that has grown since its founding in 2012 to become one of Britain’s largest digital wealth managers. It is part of a new generation of companies offering automated services and ready-made portfolios to help consumers invest.
However, despite strong asset growth and the number of clients, the company has never made a profit.
His latest accounts filed with Companies House show that Nutmeg’s pre-tax losses rose to £ 22.3 million in 2019 from £ 18.6 million a year earlier, although revenue increased to £ 9.3 million from £ 7.2. millions. Click & Invest, a robo-advisor service from Investec’s competitor, the bank, closed in 2019 after losing £ 32m.
Nutmeg’s backers include Goldman Sachs, a main rival to JP Morgan, and Schroders, the British fund management group, which each have stakes of around 10 percent. Other shareholders include Balderton Capital, while Lord Spencer of Alresford, who made a fortune with Icap, the middleman broker, and Sir Charles Dunstone, the tycoon who co-founded Carphone Warehouse, bought the business in 2014.
Nutmeg has also raised money in the past from private investors through Crowdcube, the crowdfunding platform.
Neil Alexander, the current CEO of Nutmeg, will continue to run the business after its acquisition by JP Morgan.
The US group has no current plans to remove the Nutmeg name, which will remain separate for the time being from its new online banking service, which will operate under its consumer brand Chase. Nutmeg products will not be available through the Chase app initially.
JP Morgan was long rumored to be planning a retail bank in Britain and finally confirmed its plans in January. It will compete with companies such as Monzo and Starling, as well as Goldman, which started its Marcus savings account business in the UK in 2018.
Sanoke Viswanathan, Head of JP Morgan’s International Consumer Division, said: “We are building Chase in the UK from the ground up using the latest technology and putting the customer experience at the center of our offering, principles that Nutmeg shares with us.
“We look forward to positioning their award-winning products alongside ours and continuing to support their innovative work in retail wealth management.”
Alexander said: “Nutmeg clients can expect the same level of transparency, convenience and service that helped us become a leading UK digital wealth manager.”