Introducing the next phase of the robo-advice revolution

Introducing the next phase of the robo-advice revolution

Usually when I write this column, I try to find a theme or a hook to hang it off, in the vague, pathetic, desperate hope that you might be tempted into reading it. Once I’ve sucked you in, I can then cleverly slip a bit of financial technology content in there, and everyone’s a winner.

Well, not this time, folks. No need. The last month has been a quite remarkable flurry of tech-based activity. So if we must have a theme – and of course we don’t have to, we’re independent spirits and won’t be dictated to, but it does make the time go faster – then let’s make it one of childish, wide-eyed excitement that a sector that has seemed bedevilled with huge project fails and regulatory toe-jam has suddenly burst into life.

Let’s canter through a few of the things that are worthy of your attention if you’re into all this stuff.

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A big deal

Firstly, and perhaps most excitingly, the robo-advice sector has burst back into life with a huge investment into digital wealth management mavens and Germans-with-a-sense-of-humour Scalable Capital (disclosure: Scalable is a client of the lang cat). 

The investment, which was partly in Scalable’s recent €30m (£26m) series B funding round, and partly in a direct minority stake, is the biggest corporate investment into a UK-based robo since Nutmeg were favoured by Schroders in 2014.

The figures are secret, but whichever way you look at it it’s a lot of money, particularly when you consider that BlackRock bought a US-based robo, FutureAdvisor, for $150m in 2015. So what gives?

Apart from being great news for the Scalable guys, who are genuinely nice people, this is pretty important for the digital investing sector. Those of us who monitor these things have seen the landscape for venture capital (VC) money harden up in the last six months or so; Nutmeg’s last funding round saw them having to head out to Hong Kong, and as far as we know Schroders hasn’t followed its money with further participation. 

So to see the world’s largest asset manager open the corporate checkbook (note US spelling – I’m culturally sensitive) for Scalable is very interesting indeed.

As an aside, one chap I was speaking to last week – a stalwart of the fintech scene, hipster beard and all – told me that there was no longer particular interest in good ideas from VC investors. The ideas have been had. What gets the premium now is execution and proven distribution.

Provider aims

BlackRock is a remarkable machine of a business. Along with Vanguard, it took something like 80 cents in the dollar of new investment flow in the US in 2016, and currently looks after something like $5.6trn (£4.4trn). To put that in context, the GDP of the UK was $2.9trn in 2015. So BlackRock looks after something like 2 UKs. Maybe we should let it negotiate Brexit.

It does many things extremely well indeed, but the one thing it is not – it can’t be, given its size – is fleet of foot. It clearly sees a benefit in cutting short its own development timescales by bringing in external intellectual capital and capability. That’s refreshing honesty, I think.