Nutmeg’s new in-house back office promises greater efficiency

Wealth management platform Nutmeg, widely seen as being a key disruptor in the financial services arena, plans to accelerate its development, with a target of millions, if not hundreds of millions, of trades per day.

 “We are in the business of doing stuff nobody has ever done before,” said Nutmeg founder Nick Hungerford at a London dinner to introduce latest innovations to the wealth management community. “In 10 years we will be the largest wealth manager in the City by far.”

Key to this growth strategy has been a major change to Nutmeg’s technology and operational arrangements, switching from a totally outsourced solution, handled by Pershing, to an in-house back office provided by Babel Systems.

“We are now in a position with the ability to be flexible,” said Mr Hungerford. “There is no way we could go with a provider who would say ‘this is my way, now eat it’. We wanted a provider who could be flexible, not say to us – ‘you are the 100th off 99 customers and we can’t bend to you.’”

Nutmeg is believed to have looked at a long list of six providers in the core banking technology space, including Temenos and Olympic, before settling on the Babel solution, specialising more in investment management.

Babel’s sales director Steve D’Souza said his company’s solution can offer greater efficiency without his client needing to deploy extra resources. “Nutmeg’s back office is now doing settlement and custody themselves, but without significantly adding to their workload,” he told PWM.

Babel is encouraging wealth managers to look at their back office arrangements, at a time when much of the industry innovation has been at in the front office.

“You are feeding the funnel at the top, but we are saying – let some of that creativity spread out. After all, you need a portfolio and transactions,” said Mr D’Souza. “Everybody has forgotten about the back office. But many wealth managers have clunky legacy systems, which are difficult to move away from. We can offer good, solid infrastructure, but in a modern way. We are saying you need to move to a more modern environment, not from one legacy system to another.”

By making efficiencies in the back office, wealth managers can then free up resources to spend elsewhere. “If you can cut some costs and people, then that gives you the budget to spend on the latest funky proposition,” added Mr D’Souza.

For many private banks, the next stage in this innovation spectrum involves investing in a predictive intelligence system, using technology such as the Watson system from IBM to process big data in order to help relationship managers make more effective asset allocations for clients. This solution is being pioneered by the private banking arm of DBS in Singapore. Nutmeg is also looking for a technology-enabled move in this direction.

“I see very clearly a world where we are predicting what people need, even before they realise they want it,” said Mr Hungerford.  “I don’t see any way we won’t become predictive.”