Marcus, the retail banking arm of investment bank Goldman Sachs, is set to enter the UK’s retail investment market by launching a stocks and shares Isa with Nutmeg, the UK online wealth manager.
The tie-up will enable Marcus to offer its growing UK customer base access to Nutmeg’s investment products from early next year, according to two people briefed on the plans.
The FT revealed in September that Marcus planned to expand into investments following its success with savings accounts. By offering market-leading interest rates, Marcus has raised $12bn (£9.3bn) in UK customer deposits. The appeal of launching an Isa is that it will generate fees, but the money under management will not count towards the UK’s £25bn ringfencing limit for retail banks.
Goldman’s move into the personal finance market has been driven by the need to diversify its sources of funding, which are used to power its investment banking activities.
In January, Goldman took part in Nutmeg’s £45m funding round — the largest by a digital wealth manager in Europe — alongside other investors, including Hong Kong-based financial advisory group Convoy.
Goldman and Nutmeg both declined to comment.
Offering a stocks and shares Isa makes sense for Marcus, as this form of saving is of great appeal to higher earners. At the end of last year, Marcus reported that its average customer deposit was £23,000 — just above the current £20,000 annual allowance that can be saved tax-free into a stocks and shares Isa.
Crucially, a launch early next year would be ahead of the UK’s “Isa Season” in April, when the allowance resets with the start of the new tax year.
Nearly 250,000 UK adults paid into a stocks and shares Isa in 2017-18, according to data from HM Revenue & Customs. The total market value of investments held within the tax-free investment accounts was £334bn at April 2018.
In the previous tax year, 20 per cent of Isa savers subscribed the maximum amount — but this increased to 43 per cent of those with an income between £100,000-£149,999 and to 60 per cent of those with an income of £150,000 and above.
With more than 75,000 customers and £1.8bn of assets under management, Nutmeg claims to be the fifth-largest wealth manager in the UK, but has failed to turn a profit since its launch in 2012.
Financial results last month showed that turnover grew from £4.6m in 2017 to £7.2m in 2018, but operating expenses also increased from £17m in 2017 to £22.7m, chiefly driven by marketing spend to recruit new customers. This caused operating losses to expand from £12.4m to £18.6m.
At the time, Nutmeg’s chief executive Martin Stead told the Financial Times it was his aim to reach operational profitability within three years.
Unlike investment platforms such as Hargreaves Lansdown and AJ Bell, Nutmeg does not allow customers to invest in actively managed funds or shares, but instead offers low-cost, automated investment portfolios based on how much risk an individual wants to take.
The prospective partnership with Marcus comes after the announcement of a collaboration between the robo-adviser and Taiwan’s Taipei Fubon Bank, which has also been an investor in Nutmeg’s previous funding rounds.
The partnership — known as Nano Investments — now has over 10,000 investment portfolios under administration in Taiwan.