Robo manager seeks to woo IFAs

Robo manager seeks to woo IFAs

Prominent robo investment platform Scalable Capital says IFAs have nothing to fear from its business model.

The direct to consumer discretionary fund manager which invests in a range of exchange traded funds is already working with IFAs and is close to signing deals with other financial institutions which will sell on its product.

Customers of the firm must have a minimum £5,000 investment. Each is charged an all in fee of 75bps and each can choose a 'loss likelihood measure' of between 3-25 percent, which calculates the probability of a drawdown in any one year. 

Adam French, co-founder and managing director of the London based Scalable Capital, said that while some have described his firm as a robo-adviser, a better description would be a robo investment platform.

"I do not think we disrupt the IFA market, we complement it," he said. "We work with a few IFAs right now because we provide a solution which they have never had access to before."

He believes traditional fund risk labels such as conservative, balanced or aggressive are subjective and ultimately meaningless and that a risk percentage chosen by the customer is a better measure.

"The way a traditional asset manager describes the amount of risk in the portfolio is somewhat arbitrary," he said. "What medium risk means to me can be completely different to what medium means to somebody else."   

"I want to work with more advisers," he added. "But, what I find is hard is finding the friendly advisers who are not sceptical about our space."  

Opinion from IFAs of the worth of the Scalable Capital model is mixed.

Jason Witcombe, director at Evolve Financial Planning, said such managers would have to compete with lower prices in passive management. 

"I would be pretty nervous if I was in the shoes of more traditional fund managers and discretionary fund managers at the moment. But if I was a robo fund manager I would also be looking over my shoulder and asking what do I offer over and above what Vanguard offers."

Graeme Mitchell, managing director of Lowland Financial, said that many of the tools on offer from robo fund managers had been around for "quite a while".

He said, before such robo fund managers were accepted, they had to prove that their loss likelihood measures actually worked.

"You can say this is 'the probability', but the problem they have got is proving it," he said. "Machines are fine up to a point, but you need to overlay a bit of common sense and logic, some human input."