And so here we are again, siblings. As soon as one Update is done with, the next one hoves into view, and sometimes I can’t help but believe that these small ways in which we mark the passing of the weeks until the last syllable of recorded time do nothing but light fools such as your humble Updater the way to dusty death.

All that said, it’s (apparently) Hump Day! Wooo! Insert your own boisterous GIF here and enjoy.

I’ve been thinking about the basics a little bit this week – not of platforms, or adviser charging, or back office technology – but of business. I don’t know much about high finance (but I bet those guys don’t know much about rebalancing protocols on UK intermediated platforms, so who’s laughing now, Brad?) but I’ve been following the WeWork IPO debacle with interest. There is a point at which firms like WeWork have to leave Silicon Valley and head to Wall Street, and things definitely seem to be hardening up.  It may not be cool again to say things like “we may never make a profit” and still expect to get bought ice cream.

It’s a short step from thinking about the basics of businesses generally being in favour of making money and generally against losing it to the results of Nutmeg this week. Now, I’m going to try to do a balanced Update here: it’s fun to put the boot in but not if you work at that firm. I have a Nutmeg account (I have accounts at most of the online and D2C platforms; fun at tax return time) and I like it. The app is good, the portfolio performance is not great but it’s not awful either, and the communications are excellent. I want Nutmeg to do well. I also applaud its transparency in publishing its numbers. More firms in this sector should follow its example.

So when I read quotes like “it wasn’t in our business plan to be profitable yet” after yet another report of widening losses – accumulated losses are now around the £60m mark – I feel a bit of despair. This sounds to me a bit like me trying to convince my wife that “it wasn’t in my plan to have replaced the light bulb at the top of the stairwell yet” when I have in fact been watching rugby for most of the weekend.

A few key stats for folk watching Nutmeg – losses this year were a bit over £18m. It has £1.8bn of assets (£1.5bn to the end of the relevant accounting period), and is the biggest “digital wealth manager” (what?) in the UK. The lang cat is the biggest specialist platform and retail investment consultancy in the Port of Leith, by the way.

There are some more worrying numbers in there. First, the average case size is £25k. Let’s stop talking about ‘wealth management’, then. Any provider of services or products (including advisers) who lives on basis points will tell you that £25k is far too low to make a decent business from. Everyone who has tried to live in that world has ended up having to go upwards and try to get into the space which is so dominated by HL, Fidelity and Interactive Investor.

Some more: the average yield on assets is 0.48%. That’s way higher than most advised platforms, and is the same as Hargreaves Lansdown (thanks to the lang cat’s Chris Bredin for that factoid). The average salary for someone working at Nutmeg is £68,000.

The revenue increase from last year to this year was £2.6m. The marketing spend was £7.6m. Another way to put that is that it costs Nutmeg £2.92 in direct marketing costs to bring in each £1 of revenue. At a yield of 0.48% the revenue on each pound is just under half a pence. What I’m doing right now is thinking about how many years will it take Nutmeg to cover those costs? Even with, say, a 5% annual growth rate, the answer is…a lot.

Maybe it doesn’t matter. Maybe Nutmeg’s future will be in plugging its tech into other firms (though let’s note at this point that its pension wrapper is the Embark digital pension product) and doing deals in Asia. But those moves seem to me to be side-steps because the core business simply can’t make money, despite a good proposition and bright people with pots of cash (including crowdfunded assets) being highly motivated to do so.

Nutmeg isn’t going for an IPO, so far as I know. I wonder what would happen if it were. I think I know.

I LINK THEREFORE I AM

• A wee bit of news from us – we’re #delighted and #proud to be welcoming a new feline to the consulting team – the mighty Craig Rickman, late of Money Management and FT Adviser. Craig joins us later this month, and will significantly increase the mean average amount of time each member of staff takes on maintaining their facial hair. So that’s nice. We’re dead chuffed that Craig is joining, and we hope you’ll all make him welcome when he does.
• We just can’t stop publishing research at the moment – here’s our latest paper with the Association of Investment Companies on using investment companies on platforms. We’ve done a bit with the AIC over the last couple of years – find all of it on a very special webpage here.
• A bump for our ISA paper from last week. There is a whole bunch of useful statto stuff in here which may be useful for insight packs (if you’re a provider) or client comms (if you’re an adviser). Have fun with it.
• Big step for Quilter/OMW in getting ready for its shift to FNZ. Advisers, you’ve got some work to do…
• And after last week’s disappointing timing, let’s finish by celebrating Happy Full First Week Of Nick Cave’s New Album Week! The new record is…well, it’s not easy, but it’s rather beautiful if you give it time. I’ll leave you with Bright Horses.

See you next week

Mark