Fostering the fintech challenge:
It’s been a life lived by numbers and in David Ferguson’s case the one that matters just now is the £13 billion in assets his company is administering.
He raises his eyebrows and scratches the back of his head as if disbelieving the growth achieved by Nucleus which launched amid some scepticism just over a decade ago. He and his then business partner Philip Martin set out to break the mould of how intermediaries handled personal wealth and in the process “consumerise” retail financial services.
“Even five years ago Nucleus was seen as sub-scale and questions were being asked,” he admits. “We are well beyond that phase.”
Ferguson is now focused on ramping up the Edinburgh wrap platform’s ambitions.
“We are now thinking about how we get to £25 billion or £30 billion. We will do just shy of £3bn this year which is the best we have achieved in any year.”
How much better?
“Sixty per cent higher,” he replies.
The platform administers transactions and brings together all the elements of a client’s portfolio in one place. Over the past year their investments have performed well and the benefits have flowed into Nucleus. Net inflows have doubled for the first time since the company’s second year in business.
Yet Ferguson confesses that he’s no oracle when it comes to market investing, and says the fundamentals that are supposed to dictate market patterns seem to have become redundant.
“We are at a period where the rules no longer seem to apply,” he says, recalling the comments made by his tutor at the end of his actuarial maths investment course. “After all the theories we learned he told us that nothing applies because it all relies on sentiment.”
Just now markets are buoyant with the FTSE 100 and Dow Jones Industrial Average hitting new heights, despite Brexit “fears” and the unpredictability of US president Donald Trump.
“I don’t profess to understand market trends,” says Ferguson. “My understanding is limited, but I do understand the impact they have on our business.”
The night after we met he hosted one of his company’s twice yearly staff briefings which help to bond the 180 staff and update them on developments.
“When we met this time last year it was just after the Brexit vote. We said that no one knew what would happen – just go out and build a great business.”
Since then one of his mentors and Nucleus chairman Paul Bradshaw died and he clearly still feels sadness at his passing.
“I had known Paul for 20 years and he had been around the business for ten. When Philip and I were trying to raise money for Nucleus Paul was the go-to guy. He was well-connected and knew how to structure a company. Apart from my father, he was the closest person to me who has died.”
Ferguson is now preparing the relocation of the business from two offices in Thistle Street to newly-refurbished former Scottish Equitable offices in Regent Terrace in the shadow of Calton Hill.
It will mark a new phase of growth for the company which was one of the first of the emerging businesses in Scotland to be categorised as “fintech”.
Just before Christmas the UK government appointed Ferguson one of two fintech envoys in Scotland with the aim of fostering a culture of collaboration.
FinTech is one of the fastest growing sectors of the UK economy, contributing £6.6bn to GDP in 2015 and employing over 61,000 people. It encompasses innovation in financial services including e-banking, payment technologies, peer-to-peer lending, crowdfunding, digital currencies like bitcoin, and ‘robo’ advice – automated investment advice delivered using algorithms.
After London, Scotland turns out the most fintech related graduates in the UK, but there is some debate about exactly how many fintech companies there are in Scotland, with some suggesting it is as low as a dozen.
“No, I reckon there are 60 to 70 in Scotland in this sector. About half are start-ups,” he says.
He believes fintech is a great “catalyst” for change, though he admits it could become a destroyer of jobs because it will make firms more efficient and eliminate certain labour-intensive tasks.
“On the other hand, Scotland has a strong heritage in financial services and it is important that we become winners rather than victims. We have a big asset and lots of talent, lots of expertise. If we get ahead of it we may gain jobs.”
He says the industry has much further to go in adopting new technologies. “Some industries have move quickly. Take the holidays sector, and the airlines and how we now book online and how easy it has become. Financial services companies are still going through this change. They have not sorted the plumbing.
“It will mean a spectacular sweeping away of complexity, cost and capacity across the whole industry. The interesting thing is to what extent the big companies will be willing to see their operations cannibalised.”
He says that in the end technology will be so ingrained that the term fintech will probably disappear.
“In ten years or so they’ll just be financial services companies again. Fintech is a temporary label because technology will change everything.”
Education: Edinburgh Royal High School; Heriot-Watt University (Actuarial Mathematics and Statistics)
Career highlights: Trainee actuary, Life Association of Scotland; product development manager, Ivory & Sime; marketing manager, Scottish Life International; director-owner of Abacus, a strategic marketing consultancy for life insurers; launched Nucleus in 2006
What’s the best advice you’ve received?
Think big, act small, be humble
If you were to have dinner with three people who would they be?
Nelson Mandela, Helen Mirren and Joe Strummer