How to remain relevant in the world of fintech

David Ferguson, founder of one of Scotland's most successful fintech businesses, explains the culture underpinning his firm

David Ferguson founded Nucleus Financial Group in 2006. It has grown to become one of Scotland’s most successful fintechs, as an “adviser-built online wrap platform”. He describes it as “basically a website where financial advisers can look after clients’ money better by seeing everything they need in one place”. Ferguson, chief executive of Nucleus, is new chair of the FinTech Scotland board and one of Scotland’s two fintech envoys. He has been credited with creating a positive business culture based on attracting and developing high-quality staff by making Nucleus a great place to work. David Lee asked him about his journey and his hopes for fintech in Scotland.

DL: Was the creation of FinTech Scotland last year an important step in the fintech journey?

DF: Absolutely. We had lots of willing participants but the creation of FinTech Scotland and then Stephen Ingledew’s appointment as chief executive have been crucial. Otherwise, it might just have been a collection of the well-meaning.

Fintech is a massive opportunity for Scotland and we needed Stephen to give us a fulcrum, a full-time driver for the sector.

DL: What is the sweet spot for fintech in Scotland? Where can it really make a difference?

DF: The whole fintech thing for me is about finding the meeting point between the past and the future. It’s about the energy and expertise that start-ups need to flourish and also about getting more substantial financial services establishments to modernise.

Fintech is the meeting point between the two extremes – and arguably they could not be more different – with the support of the universities and funding partners.

There will be different kinds of partnerships; a big bank might acquire a start-up, or a start-up might use a big bank to sell its products. There are examples of this happening but it’s not yet widespread and we need that.

As Scotland’s fintech envoys, I think Louise Smith [RBS] and I need to help find that common language between the start-ups and the big financial institutions, to find that common ground to give us the best possible opportunity to succeed.

DL: Have the large financial institutions grasped the potential of the fintech revolution?

DF: I think they realise that something has to happen and most of them are doing something about it. Action has not been quite as rapid as the language, but that’s just life.

DL: How important is transparency in fintech?

DF: It’s absolutely fundamental – you cannot pick technology and transparency apart. Fintech is promoting a transparency in financial services that the industry has not always been accustomed to or comfortable with.

There is a growing understanding that you have to be really open about what you do – and that’s at the heart of the cultural shift.

To do the technology side properly, you must embrace transparency.

We have to get rid of the previous opaque approach to financial services. It’s a massive cultural change.

DL: What is at the root of this cultural change?

DF: Fintech businesses are largely motivated by the desire to do things better for customers, whereas the banks have traditionally been more focused on shareholders. Now they also need a people proposition. However, the start-ups also have a problem, which is understanding how to scale up their business.

It’s about finding a balance between creating organisations where people want to work because they believe in what they do, but also delivering money for shareholders.

DL: What lessons can you offer in scaling up your business?

DF: Nucleus has been going for 12 years – six years of making a loss and six years of making a profit.

Every year of making a loss, the loss was reduced and now every year profits are increasing – and we are doing that while investing more than ever in new projects and growth.

That’s the sort of trajectory that other new fintechs can follow. It’s about creating a durable business of scale; it is much harder to build a business than to build a product.

Lots of fintechs are very strong on the product side but haven’t thought in detail about the consequences of scaling up.

DL: Why is getting the right people so important to you?

DF: It’s fundamental to the business. If you can create a product that consumers want to buy, you should be able to make money, but none of that is possible without the right people.

You need to put a relentless focus on hiring the right people, backing them and giving them support to do their job effectively. The established industry has been focused on cost control and management rather than investing in its people.

DL: What challenges have you had in attracting the right people?

DF: It’s changed over time. In the early days, the financial crisis made it really hard to get risk and compliance staff as they were being consumed by the big banks.

More recently, it has been a struggle to get tech staff due to the success of Skyscanner, FanDuel and others. The biggest struggle in recruiting staff is still in the technical areas.

DL: How should businesses go about “growing their own” talent?

DF: It’s a perpetual challenge. In a start-up, it’s really hard to say, “We’ll grow our own talent,” and invest over the next ten years because that’s a high-risk and long payback activity.

As Nucleus has grown [it now has almost 200 people] we are able to do a lot more of that.

Historically, we hired more experienced, rounded people – and while we are still hiring those people, we are also hiring young developers straight from university and seeing what journey we can take them on. We are trying to strike a balance.

DL: How has the way financial services firms attract staff changed?

DF: In the past, financial services was pretty much all about the pay. Now, certainly in smaller companies like Nucleus and other fintechs, it’s much more about the working environment and the kind of work you do.

People are more motivated by the culture of the company and whether they respect their boss; it’s much more rounded, not just about making another £2,000 per year.

It is easier for a start-up to have that vibrant culture and to look for people who are taking that more rounded approach. It’s not so easy to suddenly shift that culture if you employ 5,000 people.

DL: Does Nucleus recruit in a different way to get to the kind of people you want in your business?

DF: I don’t think we do anything radically different, although we do include colleagues in the interview process – it’s not hierarchical.

We recognise when we are hiring that it’s about us selling the company to the individuals, not the individuals selling themselves to us.

We don’t want to create an illusion of what the job and the company will be like. That’s stupid – all it means is that people leave and you have the friction cost of replacing them.

DL: What motivated you to create a different kind of workplace culture?

DF: I had an experience early in my career where I wanted to approach a piece of work in a certain way which I considered was best for the business but my boss and the company wouldn’t give me the space to do it properly.

I’ve had a belief since then that if you hire a person you think is best for the job, you have to give them the space to thrive – not turn them into a drone who is just like everybody else.

I also believe in honesty. Staff know if it’s been a good week or bad week, or month, or year. Our mindset is to tell them the truth, not to sugar-coat things. I don’t find that an alien approach.

DL: It’s often said Nucleus is not just motivated by the bottom line.

DF: That’s true, we believe more in remaining relevant than in short-term profit. But we also understand that in the real world the business has to be on a trajectory to make money and create shareholder value.

I think it’s about a combination of developing and delivering a successful product, providing a return to shareholders and having a strong people proposition – and delivering a wider societal benefit.

We’re not doing this to work hard and sell out.

We have a £14 billion platform business and we want to grow that into a £25bn or £50bn platform business.

But that will only happen if we have the right product and can create the right environment for our people. If we are successful in that, profitability and shareholder value should follow.

For more information about Nucleus Financial Group, visit their website