At Poke we keep tabs on a lot of things happening in the world of finance, and we're a bit spoilt that there's so much of it here in London. We went to see Nick Hungerford, the founder of Nutmeg and found ourselves so inspired, we wrote up some of the amazing things we learned about the company and the industry.
Nick took questions from the moderator of the session as well as the audience, and we’ve handily grouped them in a bunch of categories:
On the company, marketing and the future.
On a change in mentality. Nick got the idea for Nutmeg a while ago but went to California to do an MBA at Stanford in the process. Living there for two years changed his idea of risk. Previously, he thought risk meant doing something - a crazy sporting event, quitting his job, going travelling. He learned from his peers and professors that risk means not doing something you’re itching to do, and later regretting your lack of action.
On research: Nick and the team are believers in an almost ethnographic-like approach to research: watching how people behave with money in their natural habitat. He said that his team observed a cash point from a cafe for a few hours, and noticed that people would lift their heavy shopping bags to hide their PIN instead of letting go of the weights for a bit. It’s small insights like these that get the team to create moments of joy and delight for users.
On testing, testing, testing: it took them 519 names to get to Nutmeg, and it was the only name that got over 50% on a trust score rating. Historically nutmeg would have been a very scarce and expensive spice but later became available to many - much like how Nutmeg is now democratising wealth management.
On acquiring users: They did extensive research on their audience and segments, down to what other brands they purchase, airlines they fly with and what industries they work in, focusing on people digitally savvy enough to not feel paralysed by handing a big pot of their money over to a website. The biggest challenge was persuading people that they can and should have their money managed; that they are ‘rich enough’ to put their money in Nutmeg (where you need £500 minimum to invest). They are very careful with the language they use, as asset management is not something that their audience is keen to hear or even used to talking about.
On competition: He thinks big banks don’t have the skills to build things themselves - that big corporations stifle creativity because of the very nature of its construct, where everyone has a specialised role. He said ‘competition’ is really people leaving their money in the bank (with abysmal returns) or people becoming investors themselves (a daunting prospect for many). He’s finding that people end up doing the advertising for them - they’ll tell their older family members to take money out of the bank to avoid fees and put them in Nutmeg instead.
On bootstrapping: This would not have been possible. Nutmeg’s infrastructure needed £2m just to be built, and beta testing with people’s money wasn’t an option. If someone puts in £100,000 and wakes up to a glitch that sees their investment wiped off, excusing yourself as a ‘beta’ isn’t an option. He mentioned that it can take up to 5 years to recover the cost of acquiring clients in this industry, as opposed to just months with software. Their cost of acquisition is still higher than they would like but they are going down.
On marketing: Like with the name, he’s a big advocate of testing. They tried a lot of marketing solutions with great and not-so-great results. A traditional launch in the Sunday papers and PR didn’t do much - only 4 clients signed up on the day. Newspaper ads and banners didn’t help either - but tube adverts did, possibly because people are captive and in a reflective mood before and after work. He says the most effective marketing solutions will surprise you, and that you need to try them all, as efficiently as you can.
On having a great product: Marketing is no substitute for having a great product - one that people will talk about around the dinner party. The moments of happiness people feel when they log in and see that they’ve achieved their goals. Even if Nutmeg gets the blame when things go wrong and none of the credit if things do go right. On success: As a business, success came when they appeared in the top 20 lists for wealth managers in the UK, in a ranking where the top companies had been around for years and years.
On company culture: Despite the friendly exterior and comms, he described the culture as very intellectual and cerebral. The first 20 people took fairly large pay cuts to work at Nutmeg, and he doesn’t want people who can recite stories about how hot the market is or give him free plans and ideas for how to expand. Motivation and passion come before all of that, coupled with a belief that you are doing something that means a lot to people.
On expanding: Nutmeg hasn’t got plans to leave the UK or be white-labelled in other countries by other brands. If they capture 1% of the assets available in the UK, that would make them a FTSE100 company. If they capture 3%, that would make them the most valuable company in the UK by far. London is still a great place where the financial regulator is years ahead of other markets, and raising capital is easier than in the US since you’re not competing with as many people. Nick reckons the industry is facing a big challenge as the big banks have mostly been repackaging the same products over and over again. If 2008 was a big shock, he said that the next shock will be even bigger.
On what the future holds: Financial education. Watch this (their) space.
Our favourite thing at the end of the day?
“Where are the customer’s yachts?” - Nutmeg’s principle that customers should get rich first, the company after.