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Robo-adviser targets asset managers and banks in platform deals

Scalable Capital targets €500m within a year as it vies for bank and asset manager business

European robo-advice firm Scalable Capital is looking at deals to provide technology and money management services to asset managers and banks.

Chief executive Adam French tells Money Marketing the firm is looking at deals to allow a bank or an asset manager to have a platform where they can “plug-in” their funds or use Scalable Capital’s own platform.

French says: “Our system is capable to handle mutual funds as well so if we were building a platform for a bank we would be able to plug in their investment universe instead of our own.

“We can help other institutions with their technology to help them build their platform as well. In the coming months, there might be one or two things coming out with an asset manager or bank or wealth manager”.

Finance & Technology Research Centre director Ian McKenna says such deals should be “win-win” as the digital advice business boosts scale and the “traditional firm” would get a digital proposition in place far more quickly.

The “biggest project” at the firm, however, is the upcoming launch of a fully-integrated Sipp, which is the number one client request from clients, says French.

‘Robo will survive’

Referring to remarks on the struggles of robo-advice models in the UK market, French says the model won’t see its demise soon.

He says: “The robo-advice theme is not going away because it is way more convenient and accessible than many other options. I believe we are here to stay and proved our worth so far. I think we are growing fast enough to make it a viable business”.

Scalable Capital has been in the UK for 17 months. Collectively with its German business, it manages €250m.

“We are building for growth”, says French. He claims the firm is growing €1m a day and he aims for €500m assets under management within a year.

However, he says: “We wouldn’t be happy with just €1bn assets. We want to become one of the best digital wealth proposition in Europe so right now profitability is not what we aim for but it is not unachievable.

“Not all the growth comes from new money but also existing client base topping up even in one deposits or monthly savings. As you grow that becomes self-fulfilling so we don’t grow just with marketing.”

Finding the right fees

Currently, the firm charges 0.75 per cent management fee including VAT and trading costs, and an average of 0.25 per cent for the underlying funds. All funds in the portfolios are passives.

French doesn’t plan to reduce management fees as of yet. However he says funds costs will come down gradually, with Vanguard leading the way.

French says: “It’s great to see entrance like Vanguard coming into the market and moving things in the right direction. We use a large amount of Vanguard ETFs because they have the same philosophy we have which is low-cost, passive, globally diversified”.

But the chief executive argues Scalable Capital has more to offer to direct clients.

“What we believe ourselves to be providing on top of Vanguard, apart from the model, is the service element.

“But one of the reasons we don’t just use Vanguard products is they are not diversified enough. I feel you can improve diversification and risk return by looking at all providers. In the current portfolio we also have iShares”.

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