Nutmeg: Allowing everyone to become an investor
Nick Hungerford is the co-founder and chief executive of investment management service Nutmeg.com. Since launching in 2012, Nutmeg has transformed the investment options available to the general public. The Nutmeg business model has already won a plethora of high acclaim, most notably being recognised as one of the 50 most innovative and disruptive brands in financial technology for 2014.
Nutmeg provides an online portfolio management service aimed at individual investors, offering portfolios starting from initial investments as small as £1000. As of 2015 the company had secured a total of 50 million dollars in funding and is moving from strength to strength.
Tell me a bit about your background and where the motivation came from to found Nutmeg?
I studied business at Exeter University, and then followed a fairly traditional route into the finance industry. I worked in product and wealth management at Barclays and I was a divisional director at Brewin Dolphin. But I gave that up to do an MBA at Stanford University, which is really where the idea for Nutmeg came about.
It struck me that decent investment management was preserved only for the exceptionally rich and that by using the power of modern, digital technology it could be possible to change that and make it accessible to everyone.
The investment industry has been shrouded in complex jargon for decades. These companies are happy to keep it confusing and take high fees from clients who know no better. I wanted to demystify the world of investing, to make it transparent and fair.
We've opened up the shutters of the investment world and simplified the mechanics of wealth management. Enabling our customers to become more informed than ever before and subsequently more confident that Nutmeg is the right place to grow their portfolio in confidence.
What role has the digital nature of Nutmeg played in the success of its business model?
Traditionally, even the process of simply finding an investment manager was difficult. In the time before the smartphone and the dominance of Google, establishing a trusting relationship with a company typically came from a personal recommendation of someone already connected and 'in the know'. In essence, it favoured those who already had the inside track of knowledge.
When we founded in 2012, the internet had basically hit 100% penetration in our target market. We knew that people were hungry for our service but for years had struggled to find what and who was right for them. Our website and marketing efforts are paving the path for this lost audience.
People know what they want and customers are more discerning than ever when it comes to judging the quality and trust-worthiness of an online brand.
How does an online platform benefit your customers over a more established and traditional business model?
Our primary advantage over the traditional model is the comparative speed and simplicity we provide with all of our data. The digital era has created the impatient consumer, we expect immediacy and clarity in an age where our time is the highest premium. Traditional investment management companies simply cannot match us in this regard.
The drive for transparency gives us another edge over the traditional model – we're continually optimising our processes and formats to benefit the user. The concept of user experience is synonymous with good online service and Nutmeg has a dedicated design team assigned to improving the overall customer journey and experience at every turn with a flexibility and responsiveness that the traditional physical businesses often struggle with.
How does Nutmeg provide the transparency you mention?
For a start off, our entire business is online, You can log in whenever you want to see where we've invested your money, how it's performing and the fees you're paying for our service. There's no need to set up a meeting with an adviser or salesperson, or wait weeks on end for a paper statement to come through the post.
Fees are a huge part of our transparency too. Many investment businesses have endless lists of additional charges, commissions and hidden costs that mount up over time and really eat into a customer's net returns. We have just one annual management fee. No set up charges, no exit penalties and no sneaky extras.
We communicate openly and freely with our customers too. We produce a monthly video to let customers know how their portfolios are doing and what changes we're making on their behalf. And our 'nutmegonomics' blog is one of the most active investment sites you'll see on the web, where everything is written to help our community understand their finances.
What's next for Nutmeg? How do you plan to maintain such rapid growth over the next 3 years?
We want to focus on opening up our service to an even wider range of users, particularly the younger generation. Our newly launched SIPP competitor product is aimed at engaging this younger audience and encouraging them to get informed and think about their financial future. We'd love to see ISA saving schemes and pension pots become the norm for young people; starting early pays dividends down the line.
We'll keep doing what we're doing, improving our core proposition in line with customer feedback, and ensuring that we're supporting existing and potential customers with all the data and resources they need to make informed decisions about what they want to do with their money.
How do you think the investment management space will evolve in the future?
I believe we'll see a surge of interest in the market from an increasingly young and informed audience in the coming years. And we'll see a lot more progressive, digital models like Nutmeg come to the fore and dominate the sector.
I think the digital platform is moving from strength to strength and I can envision more and more services evolving to emulate Nutmeg's success.