ID Card: #2 robo-advisor in Europe
Founded in December 2014, Scalable Capital is a German robo-advisor. It has doubled its assets over the past 6 months to reach €1bn AuM and 30,000 customers in May 2018. It is now positioned #2 in Europe, behind Nutmeg and around #10 worldwide.
- Geographic coverage:
- Germany: January 2016
- UK: July 2016
- Austria: passported in July 2016, Tax reporting 2017
- Switzerland: January 2018
- Employees: 70 (40 in technology, 8 PhDs)
- Money raised: €41m, with a significant minority share (possibly €15-20m) from BlackRock which Deputy COO is a supervisory board member.
A dynamic risk management process...
Model portfolios are built on the basis of a proprietary risk management algorithm, using a quantitative simulation framework running Monte-Carlo simulations.
With this approach, 23 models portfolios are available, depending on the VaR (value-at-risk) level, representing a potential annual loss. Portfolios are ajusted daily, to maintain the VaR target.
Clients can select from all or a limited sub-set of those model portfolios based on the results of the suitability check, realized with a classical knowledge / experience / risk appetite questionnaire.
The investment universe is composed of around 2,000 ETFs (mostly provided by iShares and Vanguard), representing more than 8,500 securities across 90 countries. Traditional asset classes covered as well as real estate and commodities.
Performance track is in line with Morningstar benchmark indexes, but with lower max drawdown and volatility.
... with traditional services
Scalable Capital offers discretionary management only, starting from £/€10,000 initial investment.
However, a financial advice on request is proposed with a – non typical – fixed billing (£200), after a free of charge initial consultation, during which an advisor helps the client determine the suitable service.
In Germany, only a General Investment Account is available. In the UK, Scalable allows to open additionally an Individual Saving Account (ISA) and – since May 2018 and the AJBell’s partnership agreement – a Self-Invested Personal Pension (SIPP), each of them with different risk categories. Scalable offers the capacity to transfer an existing investment account within 30 days.
Account monitoring is done through a commonplace dashboard, available on mobile and web.
A B2B-reoriented development strategy
Like many competitors, Scalable Capital has moved from D2C only to B2B solutions and partnerships, to enlarge its client base, acquire volume and accelerate its development. This strategy mostly explains the recent AuM growth.
- A co-branded distribution: ING-DiBa’s partnership (Sept. 2017). It was the first fully integrated partnership between a major German bank and a digital advisor. While Scalable manages client investments, ING-Diba is in charge of the custody and the promotion of the service on its website, with shared fees (0.75% p.a. + 0.25% average ETF fees). The partnership provided a particular boost to Scalable’s growth: in the first two months of the cooperation, almost 7,000 ING-DiBa customers invested more than €150m.
- Employees savings partnership: Siemens Private Finance and BlackRock (UK). The principle is to facilitate employees' and retirees' access to the service, with the 6 first months free of charge and with a £/€5,000 minimum investment.
Finally, even if some special feature could be noticed - like a multi-jurisdiction AML/KYC and a partnership with dedicated custodian in each country - Scalable Capital is an ordinary robo-advisor, with traditional services, but foremost a well executed strategy.
For further information on Scalable Capital, see Business Intelligence's full study here.
Author: Pascal Buisson - June 2018
