DIY Investor Magazine
/
September 2016
42
Adam French
– A ‘digital investment manager’ or
‘robo-adviser’ is a wealth management service offered
to investors as an online service, usually on the web or
as an app.
While the access point for the robo-customer is always
digitised, the investment strategies behind the various
offerings vary and some are not that different from a
traditional investment manager.
WHO IS ROBO-ADVICE AIMED AT?
The dominating belief is that robo-advice is aimed
at millennials. While that may be true for some, at
Scalable Capital we have had strong demand from a
wider age range than we were previously expected. I
think that’s down to the sophistication of our investment
proposition, which – from our customers’ feedback – is
really appealing to experienced investors.
What problem does robo-advice solve?
We live in a very interesting time where many
professionals are finding they have less and less time
to deal with their finances. At the same time they are
aware that many traditional routes are too expensive
and perhaps not even accessible due to high minimum
account balance requirements. Robo-advice is
democratising the world of wealth management.
We should also be aware that our generation will have
to invest more to be able to ensure we have enough for
our retirement. This means we can no longer carry the
burden of unnecessary costs and hidden fees, which
are still prevalent in the industry today. Robo-advice
finally puts a fair price on wealth management.
FINANCIAL ADVICE IS TIGHTLY REGULATED, HOW
CAN THE OUTPUT FROM AN ONLINE PLATFORM
CONSTITUTE ADVICE AND WHO IS CULPABLE IF
POOR ADVICE IS GIVEN?
For Scalable Capital, this question actually highlights
an important difference between ‘digital investment
managers’ and ‘robo-advisers’. Most people use the
terms interchangeably but in reality there are some
offerings that are at the full end of regulated advice –
robo-advice – but there are also others like us that offer
online discretionary investment management services.
What we do is actually quite removed from advice and
you might even say guidance as well.
ARE ALL ONLINE AUTOMATED INVESTMENT
PLATFORMS THE SAME?
The packaging is often the same but the product is
very different. There is a common misunderstanding
about robo-advice; while it always constitutes a digital
platform, the way clients’ money is invested is not the
same.
Most robo-advisers are very similar to a wealth
manager in how they invest your money. They keep
portfolios to a fixed weighting, no matter what markets
are doing.
At Scalable Capital, the investments we make on
behalf of our clients are in line with their risk tolerance
at all times and in all market conditions. If at any time
our client’s portfolio threatens to exceed the loss risk
he or she is willing to take, a risk-reducing portfolio
reallocation is carried out automatically.
The ultimate result for clients is simple: the risk in their
portfolio is maintained at the level they set it at and
fluctuates less with the risks on the financial markets.
The idea of re-adjusting portfolios based on their
simulated risk level has been applied to investment
management before, but only by big banks and for
very large portfolios of institutional investors. It’s now
time to make this accessible to many more mainstream
investors.
DIY Investor
– Fintech is currently the buzzword in financial services, but
what is a ‘digital investment manager’ or ‘robo-adviser’ and how do they work?
WELCOME TO THE MACHINE
IN AN EXCLUSIVE Q&A SESSION WITH DIY INVESTOR, SCALABLE CAPITAL’S ADAM FRENCH EXPLAINS WHAT ROBO-
ADVICE IS, WHO IT’S FOR AND WHY HE BELIEVES THAT IT IS DEMOCRATISING THE WORLD OF WEALTH MANAGEMENT
