InvestmentsApr 19 2016

European robo-adviser targets UK advisers

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European robo-adviser targets UK advisers

Soon-to-launch German robo investment manager Scalable Capital wants to work with UK advisers seeking a solution to lower value clients less brutal than showing them the door.

The German company, which is launching its investment product next month ahead of formally entering the UK market next quarter, said it has a waiting list in the UK for those keen to sign up.

In May the company hopes to be able to open up the platform to everyone, so external investors can us e it to invest.

The service is aimed primarily at retail investors, Adam French, co-founder and managing director of Scalable Capital, said it has also seen interest from independent financial advisers.

Scalable offers them access to what he said is its technology-driven investment solution based on empirical research results, with a risk assessment process he said can help them service lower value clients.

The company received FCA authorisation in February to supply discretionary services.

Mr French said: “It’s not just an intelligent way to manage their clients’ money, but it also has the benefit it can handle smaller investment amounts, is scalable and comes at a very competitive price.”

The company is “open” to collaborations with advisers, he said.

It’s an intelligent way to manage clients’ money. Adam French

Scalable Capital’s service will allocate each investor’s ETF portfolio according to their risk appetite using an algorithm.

Portfolios will be constructed using 14 ETFs divided into equities, bonds, real estate and commodities.

Scalable Capital will charge retails advisers 0.75 per cent a year, inclusive of account management, custody fees and trading costs.

The charge also applies to financial advisers recommending its service. The company said it would “never” charge advisers more than the 0.75 per cent stated on its website, adding that if an adviser wanted to charge extra, they would need to make that transparent to their clients.

Set up just over 15 months ago, the company, which was founded by Mr French, who is a former Goldman Sachs investment director, former Barclays vice-president Simon Miller and former chief executive of online retailer Westwing Russia Ella Rabener, spent last year growing the business and developing its model and a team.

It has raised £5.6m to build its business in the UK and support its operations in Germany, where it has been live since late 2015.

Mr French said: “We see ourselves as a European robo-adviser.”

He said incumbent financial services have rested on their laurels and can charge high fees for face-to-face business, adding: “We live in a world of greater transparency. Money management is one of those industries where you get what you don’t pay for. It is becoming more transparent and cost-effective.”

Millennials are looking for a technology-led solution, said Mr French. “They don’t want to see advisers in oak-panelled rooms. They want to open the app to make a deposit or withdrawal.”

Scalable Capital has its sights set on the £250bn sitting in cash Isas in the UK and the 2 trillion euros in current and savings accounts in Germany.

Mr French said: “Leaving money in savings accounts is not going to be the solution.”

David Penny, managing director at Taunton-based Invest Southwest, said: “With that specific offering you would need to do a lot of due diligence.

“Generally-speaking, with the advice gap there will be a lot of receptivity among the public for this kind of thing. It would be foolish of advisers to close their eyes to it.

“The problem with ETFs is in tracking assets. You need to be careful, but they are cheap. In principle I’ve nothing against it but it will always be a poor second best to the real thing, but as there are not enough advisers and advisers that won’t deal with smaller clients, that’s where this comes in.”