New Approach to Investment Management

Carson Cole, 2013  

The biggest question I'm asked is, why NUKU? I smile, because I just love the opportunity to explain what we've envisioned, designed, built and are now just about to launch in NUKU. The simple response is, we're basically investment management on the web. But for so many more reasons, we've ended up discovering that we could offer more capabilities than the investment management industry has ever offered, and now to be able to offer it to even more people.

NUKU started out as my own project to build a system to help me manage my own investments. I had long been in the institutional investment management business, and I realized there were big advantages to actively managing an investment account. But the more people I talked to, the more I realized that few were optimizing, much less even paying attention to, their investments. Could they easily solve this problem? No, because the minimum amount required to meet with a true, active investment manager using investments and not financial products (which is how they will get paid) is at least $1.5 million. I like to say that the more money you have, the higher up the floor you'll visit your investment manager. Snobbery? Not at all. Any good investment manager will spend a lot of time managing an account, researching and picking suitable investments which can basically take the same amount of time regardless of it being a small or large account. So an investment manager is limited by scale and is forced to focus on big accounts. I thought, could we design a system that could scale, and still provide the attention that an actively-managed account benefits from?

We dived into this challenge and the result is a service that provides active investment management, and to accounts as small as $50,000 (less than that and the benefits of diversification become a bigger challenge). In talking this over, someone suggested the tagline "Invest like a billionaire with NUKU", which does humorously capture the point--billionaires most often do have their assets actively managed, as the amount of money justifies the labor and skill level involved--although we won't be using it as to us it seems to diminish the seriousness for which we must take in managing someone's financial assets.

Other than actively managing investment accounts with as little as $50,000, how else is NUKU different?

Three of the biggest features of NUKU:

  • The ability to change your investment objectives any time, and
  • the fact that we review accounts at least daily, and
  • we charge only one fee--there are no commissions or other direct/indirect fees.

Changing your investment objectives any time is an impossibility with a financial advisor. You could do it once, maybe twice in a period of a couple of days, but you'll wear their patience thin very quickly. Of course, unless you are billionaire. But even after calling and telling them how you would like your investments managed going forward, it would take them a few hours, and more likely a week to fully implement the change. At NUKU, we've moved the bar: you can login anytime and change your objectives, and on top of that, we'll implement them immediately if its during market trading hours.

Reviewing accounts daily--what does that mean? Investment managers do their own research, and read the research of others, and ultimately might make a change in the portfolios they manage, which all takes time. Reviewing every account they manage every time they arrive at a new investment opinion is basically impossible. So changes are gradual over time, if ever. At NUKU, if an analyst changes an opinion they'll update our research system which is accessed at least hourly when we review every account and we check for updates. This research update could lead to immediate changes in account portfolios, and at minimum, we'll catch them hourly. Take for example Exxon Mobil (XOM) and the possibility they may cut their dividend. Lots of investors hold Exxon for the dividend and as soon a dividend cut hits the news, investors will start selling. At NUKU, our system might determine an account should no longer hold Exxon as a result of this, and we would reduce or eliminate Exxon positions within an hour. To see the frequency at which we review accounts, check out this:

The third big feature is our one fee only policy. It was important to me from the beginning to create a service that simplified the often complex and layered fee structures that are pervasive in the financial industry. Layered in the sense that people are being charged in multiple places, which many probably suspect (as I do), but don't fully understand. We've laid out the fees that are common in the industry here: There aren't any incentives for us to over-trade your account (generating commissions), or using any investments that might offer additional compensation to us. The bottom line is, we have every incentive to help you achieve your investment objectives.