Nutmeg is reducing and simplifying its management fees, replacing its six fee bands with four and is reducing its starter fee of 1 per cent to 0.95 per cent.
Customers across the other fee bands will see their fees reduced too, by up to 0.15 per cent.
The online investment manager stated this shows the power of compound savings.
Reducing the fee on a £100,000 portfolio from 0.6 to 0.5 per cent saves £100 in the first year, but after 20 years the compound saving is worth £5,350 - more than 53 times as much.
Nutmeg’s fee structure (all inclusive of VAT)
Old fee band | £1k-25k | £25k+ | £50k+ | £100k+ | £250k+ | £500k+ |
Old fee level | 1% | 0.9% | 0.75% | 0.6% | 0.5% | 0.3% |
New fee band | £1k-25k | £25k+ | £100k + | £500k + | ||
New fee level | 0.95% | 0.75% | 0.5% | 0.3% | ||
Range of possible amount saved* | £25-£615 | £1,900-£3,799 | £5,350-£13,374 | No change | ||
*Calculated over a 20 year period on an average annual investment return of 5.5%.
Nick Hungerford, chief executive of Nutmeg, stated being told how much you pay for a service is a basic right and he remains astonished that many financial providers “bamboozle” their customers with multiple charges.
He said: “The decision to lower our fees reflects our advances in technology and our constant mission to make the market work better for customers.
“The only mechanism we have for guaranteeing greater return is reducing fees. With our lower fees, customers get to keep more of their money – and a small change in fees can have a big impact.”
Last August, Nutmeg made an opportunistic move for “dumped” Brewin Dolphin clients - after its decision to withdraw bespoke investment services for direct clients with less than £150,000 to invest - offering three months of free service and a box of chocolates.
The firm, which moved into pensions last year and also has plans to launch an advice service, has previously called out providers for not doing enough to communicate pension costs.
peter.walker@ft.com
