Well, after a period in which all the talk was of funding moving away from robo-advice to ‘insurtech’ and ‘regtech’ and other things ending in ‘tech’ that neither you nor I understand, BlackRock and Scalable Capital have come from nowhere and given us all plenty to talk about.
(Before I crack in, a bit of disclosure: Scalable Capital is a client of the lang cat, and a very pleasant lot to deal with they are. Nothing here has anything to do with that.)
SCALABLE AND BLACKROCK UP A TREE, K-I-S-S-I-N-G
First, the details: BlackRock has led a series B funding round of, £30m (about £21m but ask us again in a week) along with two other investors. It has also taken a minority stake directly in Scalable Capital for an undisclosed amount.
This is a big deal for a couple of reasons. Firstly, BlackRock is YUGE. Its AUA is roughly twice the size of the UK’s GDP. For it to favour Scalable is a huge vote of confidence in that business, in the same way as Nutmeg benefitted from Schroders taking a stake. Secondly, BlackRock also owns a US-based robo-advisor, FutureAdvisor, for which it paid about $175m in 2015 at the height of the robo hype wars. So this tells us quite a lot about how its strategy to amp up the tech side of its business will play out.
In case you don’t know, Scalable is currently live in the UK, Germany and Austria and has about 250m under administration. It’s a discretionary wealth manager by permissions, and doesn’t give advice as we would understand it in the classic definition here. It has already shown an ability to diversify its distribution strategy beyond pure retail, with workplace deals and third party deals in its European markets. And without burning millions on display advertising it’s attracted 250m in just a year or so. Not bad, and a sign of intent.
Weirdly, the robo market feels sort of mature now to me, at least in intellectual capital terms. Most folk do shades of roughly the same thing, with the biggest twist being in risk models or investment management style; something most clients will struggle to understand. What matters is the ability to execute, that’s where the money will go and where we’ll see the winners and losers. As with everything it’s down to execution and distribution. I guess what BlackRock sees in both Scalable and FutureAdvisor is a quick route through interminable tech builds to market – and it knows a thing or two about what to do once it gets to market.
INVESTEC CLICK & INVEST
And that brings me to our other big robo news of the day down the other end of the pitch, the launch of Investec’s ‘Click And Invest’ service (www.clickandinvest.com). This is Investec’s shot at democratising their discretionary service, sort of.
The minimum investment is £10k, and the charges are 0.65% tiering down to 0.35% for Investec, and an average of 0.6% for the portfolios, of which there are five. There are no other charges bar a transfer out charge. The portfolios are mainly active, apparently (though the top holding in the adventurous fund at 11% of the total is a Vanguard S&P 500 ETF) and Investec makes much of how you can tap into its aeons of investment knowledge. You’ll need some of your own too; the documentation falls into that classic trap between very simple and then expecting you to know what various different benchmarks are. I guess this isn’t aimed at beginners really, despite the very nice video description of investment risk from the well-spoken chap in the tie.
I took the journey as far as giving fake bank details (sorry lads) and it was, fine. Not bad. Very good for a fusty discretionary manager; not as good as Nutmeg or some of the others. There was little different about it to be honest and that’s one of the things that makes me think that this robo market has reached some level of maturity. It’s worth saying that Click & Invest does give you advice, which means there’s a little more to the journey than some others.
I don’t want to be down on Investec; they’ve managed to launch something and that’s always laudable. Prizes and kudos to those who make it happen. But I can’t help feeling that the point above about clients not really getting how one manager distinguishes themselves from another will bite Investec here. Maybe I’m too pessimistic. Maybe clients won’t care too much about that. Maybe Investec’s brand will carry them through (cool zebras bro) and this will quickly vault into the billions.
To sum up? I guess Click & Invest is the answer, if the question is ‘how can I get a watered-down version of Investec’s investment style at 1.25% without meeting anyone from Investec?’