Fund management giant Blackrock has confirmed it has taken a “significant minority stake” in robo-advice firm Scalable Capital, as revealed by FTAdviser last night.
In a joint statement released this morning (20 June), the companies announced the investment is part of a 30million euro (£26.2m) funding round led by Blackrock alongside existing corporate investors.
The exact size of Blackrock’s stake, or how much it paid for it, was not disclosed.
Blackrock has taken the stake in Scalable Capital to “help them grow their business with financial institutions and corporates”, according to the statement.
Scalable Capital, which launched in the UK last summer, describes itself as “Europe’s fastest growing digital wealth manager”.
Our investment in Scalable Capital allows us to meet these evolving needs of our clients and their customers and to help shape their business models for the future.Patrick OlsonIt doubled its assets under management to €200m (£172m) in the first quarter of the year.
The robo-adviser exclusively uses low-cost exchange traded index funds in the construction of its investment portfolios.
Scalable Capital will remain an independent company following the deal. Its product selection and asset allocation decisions will continue to be independent, the company stated.
Patrick Olson, Blackrock’s chief operating officer of EMEA, will join Scalable Capital’s supervisory board.
Mr Olson said the deal is one way Blackrock is adapting to the rapid pace of change happening in the retail distribution landscape, as consumers increasingly engage with their financial investments through technology.
“This trend is prompting strong demand from European financial institutions – including banks, insurers, wealth managers and advisory firms – for high-quality technology-enabled investment solutions.
“Our investment in Scalable Capital allows us to meet these evolving needs of our clients and their customers and to help shape their business models for the future.”
Adam French, co-founder and co-chief executive at Scalable Capital said: “Blackrock shares our vision that technology is not just a competitive advantage but a requirement for wealth management businesses to be successful in the future.
“Its investment in our firm is a fantastic validation of our work so far, opens up new growth avenues for our business and firmly establishes us on the digital wealth management map in Europe.
“Blackrock's backing provides a huge opportunity for us to partner with their clients to help accelerate our business with financial institutions and corporates.”
In a recent interview on Scalable Capital’s website, Pollyanna Harper, head of UK intermediary sales at Blackrock’s ETF business iShares, discussed the possibility of the fund giant working with tech providers.
“As a big player, we can start to leverage the nimble tech providers for what they are very good at,” she said.
“This will also help the tech providers establish their brand presence across the market.
“At the moment, I don’t think that small providers with low brand awareness will succeed without the backing of a larger brand.”
Nearly a third of large banks and asset managers expect to buy a financial technology firm in the next 18 months, according to a report compiled by law firm Simmons and Simmons in April.
Those findings came as the regulator’s director of strategy said greater use of robo-advice will address the Financial Conduct Authority’s concerns about advice charges.
Christopher Woolard was speaking in April after the FCA expressed concerns some consumers were not getting value for money when they paid for advice.
He said the FCA is encouraging greater use of robo-advice to make sure people can access advice at different costs.
However robo-advisers have some way to go to gain the trust of consumers.
Robo-advice is less popular than financial advisers, friends or even the internet, according to research published in May.
The fifth annual ING International Survey Mobile Banking 2017, which quizzed nearly 15,000 people across 15 countries, found nine in 10 Europeans would not let a robo-adviser manage and make decisions about their finances unilaterally.
laura.miller@ft.com
