Co-founder and CEO of Nutmeg, Nick Hungerford, talks to us about the savings and investment management service.

Nick Hungerford has a decidedly calm air about him, a fitting characteristic given that the co-founder of Nutmeg, the savings and investment ‘management service’ for busy professionals (and a perfect example of disruptive innovation since its launch in 2011), is so personally invested in looking after other people’s money. Yes, this entrepreneur exudes the kind of authoritative, take anything in his stride yet take no prisoners approach necessary to enforce his manifesto, in a nutshell (s’cuse the pun), a mission to ‘democratise investing and to improve net investment performance.’

Hungerford is in the business of building trust; a ‘steady and secure’ approach that belies a certain Robin Hood ethos: putting the power back in the hands of the people – a pivotal battle in a personal war; doing away with the often outdated modes of elitism and hoodwinking complexity – the ‘emperor's clothes’ if you will, that keep the investment industry turning on its axis.

But first things first: where did the journey begin? The light bulb moment was relatively simple; ‘It was purely a result of my friends in the evening having a dinner party or at work hanging out asking me how they could save or invest. Just by virtue of the fact that I had worked in the industry,’ [Hungerford has an extensive and fitting CV, including an MBA at Stanford and a year as divisional director of Brewin Dolphin Securities, not to mention four years as a manager at Barclays]. ‘My reply was always: 'I’m so sorry but you’re too poor for me to help you' - that’s pretty sad... After a few of those you think: ‘Actually this is a bit ridiculous.’

‘I’ve grown up loving investment and reading all about it,’ Hungerford says of the drive that has led to him targeting a previously neglected band of investors (those with £1000 or more). ‘You just know that investment’s theoretical and if you have ten million pounds and I have ten thousand pounds and we both have the same aims, objectives and largely the same time horizons - then largely we should both benefit from the same asset allocation, the same portfolio.’ In Hungerford’s eyes nothing is stopping that ‘except the incumbent system.’ A system he aims to change with low fees, a simple, easy-to-navigate interface, a portfolio accessible online at any time and a customer support team on hand to reassure you. Furthermore the strategy around the investments themselves should be noted; it’s all about diversification - spreading your risk so you don’t have all your ‘eggs in one basket’.

Challenges of course abound - it’s not just about making investing both straightforward and fun: this is an industry where regulation follows the entrepreneur at every turn (and rightly so). ‘I have friends who after graduation were starting businesses with millions of pounds of revenues within a year,' Hungerford says, 'but it’s not like that for us; we needed a year to get authorised by the FCA [The Financial Conduct Authority], we needed a year to get our partnerships in place. This is a giant opportunity and a potentially giant business but underlying that is security; our security is bank level security. That’s hard,’ - though ultimately reassuring for first-time investors making their first forays into the brave new world of portfolios, stocks and shares.

As a dedicated money man, Hungerford has some excellent tips: ‘Consider investing in the UK,’ he says, ‘in smaller and mid-size companies; there’s a strong domestic recovery going on, and Europe is showing signs of strength as well which means our businesses are starting to export more - so look close to home.’

But what of those looking to follow in his well-heeled footsteps, by seeking their own investment? ‘Describe my strategy... read begging,’ he laughs. ‘The number one tip I have to share is never answer the same question twice - because if you approach lots of angel investors or venture capitalists and they’re constantly giving you the same feedback about why your idea doesn’t work then you’ve got to be self reflective. If you continue to squash every question then eventually someone will be left without any questions to ask you and that’s a good position to be in.’ Secondary advice comes thick and fast; ‘Speak to people who are relevant to your business. Find people who have common ground and can understand your concept quickly and be persistent. If you’ve got a good idea and you follow those three strategies you’ll be alright.’

So there it is; the mission, the man, the manifesto – though it would be foolish to assume Hungerford is alone at the frontier. There’s an extensive and dedicated team, spearheaded by Hungerford’s co-founder, ‘My uncle William [Todd; Director and Chief Technical Officer]. I’ve been trying to get him involved in crazy ideas for a long time, he’s a technology genius and has worked all around the world in financial markets and technology, so the two of us together make quite a good combination.’

Which brings me onto the Nutmeg culture - what is it like? Drinks down the pub of a Monday? ‘We’re less of a pub team than most financial businesses would be,’ Hungerford laughs, ‘but we do stick together - we go out and have barbecues, we might go and watch an event together.’ But by far the most prevalent characteristic is a group of people who are ‘intellectually curious.’ Out of forty staff Nutmeg boasts ten or eleven different nationalities, not to mention ‘a hundred years worth of experience in our investment team and that’s a lot... You need to have lived through it yourself to understand the emotions, to understand that you shouldn’t be selling at the bottom when everyone else is panicking or buying at the top when everyone else is buying.’

Since HR is the founder’s perennial bête noire, does Hungerford have any strategies for sourcing the right staff? Number one: ask the right questions. Case in point: ‘I hope no one who ever interviews with Nutmeg reads this,’ he laughs, ‘but I do have one question I always ask which is: 'Can I have the name of one of your siblings or your best friend?' I write them down and then I say ‘In ten seconds give me three words that your mum would use to describe you and three words for your sibling and your best friend.’ You find that because they only have ten seconds people will really be honest and they’re also not looking at it from their perspective but from someone else’s. I really like that because it allows me to have a laugh as well.’

There’s a very upbeat mentality surrounding the entire Nutmeg venture and Hungerford in particular, no surprise then that the British Government actively targeted the company to launch in the UK over and above Silicon Valley, a choice this entrepreneur is glad he made. ‘People always say: 'Why did you choose to stay in the UK?' Well the sun shines sometimes,’ though for this founder it’s all about ‘a great culture and work ethic... Finance is very strong; we have a very supportive government... The population is very tech savvy; you wouldn’t think the British are more so than those in California but actually there’s a higher rate of Internet banking adoption and we’re also quite well disciplined.’

The perfect landscape then, but what of Nutmeg’s future plans? Will there be an app for example? ‘Yes! I think about it every day – mobile is definitely in our strategy – it’s in the pipeline... A horrible realisation for an entrepreneur is you can’t do everything all at once.’

What he can do in the interim is educate people on the self defeating and ergo self fulfilling prophecies of the more tried and tested methods of investing, such as the ‘bricks and mortar as pension mentality’ so common of our era. ‘I have a real issue with this - especially in current times; artificially low interest rates, people are massively over-leveraging themselves and it’s going to be a huge issue one day. Unfortunately the generation that are sucked into doing it, my friends - anyone between 25-45 are exactly the people who are going to get screwed by this phenomenon, so they’ve seen their parents make a chunk of money on rising asset prices and house prices. Those purchases are all being leveraged as well so it exaggerates the effect. We weren’t born when there were 15% interest rates. The sensible people are splitting their assets, you might have half in Nutmeg, half in a house but it’s pretty hard if you have to go and buy a £400,000 house because it’s just so mortgaged.’

A ‘dangerous’ attitude in Hungerford’s opinion and one that needs to be corrected - and swiftly. ‘The other thing that I think people don’t appreciate is that property is just about the worst asset you can own. It’s ill equipped, expensive to maintain, very hard to value, incredibly volatile, immeasurably psychologically damaging. You don’t want to sell your house when you see the value’s gone down. You always over-estimate the potential for what it’s going to do. But of course it’s a media darling so... I hope more people are understanding that you can have a portfolio in nine different asset classes geographically diversified all around the world or you can buy one asset in one place, with massive leverage. It is hard though - people are very attached.’

Another crucial topic that causes ripples through that calm exterior is state pensions; ‘Most people under the age of forty recognise that they’re very unlikely to get a state pension and I think we’re all just waiting for the government to admit that, otherwise they can just keep pushing the retirement age up to seventy-five and then eighty and so on and so forth. That’s ok but I’d much rather someone just turn around and say: ‘Right, you’re on your own, suckers’ because at least it’s the truth. So we all need to start saving and corporate pensions just aren’t going to cut it.’ What’s the solution? The Nutmeg SIPP (Self Invested Personal Pension) of course, which should be on the market in the next twelve months.

When listening to Hungerford speak, there's a sense of someone who has a love of detail, a dogged determination to provide the best possible service for the customers, hence the firm’s use of ethnographic research; ‘If you are serious about discovering what it is that customers need and want and how to solve a problem, our view is that you’ve got to spend a lot of time speaking to and looking at and watching those customers. Ethnographic research is all about spending three, four, five hours at a time with a person or a family. It’s observations and behaviours; when mum is getting ready for school in the morning, what shortcuts does she use? And for us it’s the same in finance - for example the way investment works at the moment: you go and see a private banker or a stockbroker and they put all your money in one pot and ask you: low, medium or high risk? We discovered that’s not the way people think about their money. First of all they don’t know what that means, because their risk changes depending on their time of life. When you get married you have a very different risk tolerance to when you have a baby.’

Which brings us onto the subject of holistic investing. ‘It’s something that everyone who’s a potential Nutmeg investor knows they should be doing but it’s very hard to put into practice. I should be saying to you: 'Your portfolio, no matter how big or how small, should include a variety of different asset classes; bonds, cash, stocks and shares, commodities, gold, and agriculture - but it should also include geographic diversification, so we should be looking at the US and Australasia and it should also be looking at different currency factors, different sizes of companies, how macro trends are going to affect your portfolio - but unfortunately that’s a lot of work for most people. Most people get on the tube and see an advert for a fund named after a planet and go and buy that for their ISA. That’s not really a holistic view, it’s falling prey to marketing and then having a series of different funds that make up lots of products, but it’s not a portfolio.’

‘I would try and encourage everybody to make sure they are taking advantage of all the different assets that you can buy, to build a portfolio that is truly a reflection of the risk they’re willing to take and the reward that they want - and if they don’t want to do the research and spend an hour or two every day on it...’ Then use a service like Nutmeg, is the implication - and why not? As Hungerford so concisely puts it; ‘People will realise they don’t need to go and see someone once a year and pay ten thousand pounds for that.’ Whether his assertion that ‘if you use Nutmeg, potentially you could retire three years earlier,’ and further that ‘you could send your children to university or you could buy a house,’ will be true for each and every customer remains to be seen, but what certainly rings true is that both Hungerford and Nutmeg are on a mission; one that no doubt will, ‘make a hell of a difference to people’s lives.’

Interview by Alice Kahrmann 

October 2013