Scalable Capital Review

Scalable Capital Review: Low Fees For Managed Service Is A Game Changer

Scalable Capital is Europe’s fastest growing digital wealth manager. When clients sign up for their service, they get a personalised, globally diversified and fully managed portfolio. That portfolio is then optimised and monitored to manage risk and maximise returns. And they do all of this for much lower fees than traditional investment management firms. Here is how Scalable Capital describes their services on their site: 

• We provide a personalised, globally-diversified portfolio designed to create long-term wealth.
  
• To do this, we select the best and most cost-efficient Exchange Traded Funds (ETFs). 
  
• We monitor and manage your portfolio continuously with our proprietary risk management technology. 
  
• Scalable Capital already has a strong customer base and it is growing rapidly and they offer their service in both Germany and the United Kingdom. 

Here is a summary of their offering: 

• Assets Under Management: €100 million  
  
• Minimum Deposit Amount: There is a minimum investment of £10,000. This is a higher amount than other robo advisors but is required for their investment model to work optimally. They need to be able to invest in different asset classes and smaller investment amounts do not allow them to do that. 
  
• Portfolio and Asset Allocation Details: Scalable Capital uses exchange traded funds to build cost-efficient and globally-diversified portfolios. 
  
• Fees: The total fees charged by Scalable Capital is 0.75% per year based on the total assets under management. This fee is taken directly from the client’s portfolio on a monthly basis. 
  
• Account Types Available: Scalable Capital clients can open a General Investment Account (GIA) and/or an Individual Savings Account (ISA). 

Scalable Capital Minimum Deposit Requirements

Depending on the platform used by each robo advisor, they offer different minimum deposit requirements when setting up accounts. In Scalable Capital’s case, they have a £10,000 minimum investment requirement.

The reason they say for this higher amount is because they want their clients to be globally diversified across a number of different exchange traded funds, and with any amount less than £10,000 they are not able to do that.

Scalable’s minimum investment requirement is definitely higher than other robo advisors in the United Kingdom, however if you have that available money to invest then they are a good alternative due to their lower fees.

Scalable Capital’s Portfolio and Asset Allocation Details

Scalable Capital is a passive investment manager that offers dynamic risk adjustment on a regular basis. Their investment model uses exchange traded funds to invest across multiple asset classes including stocks, bonds, commodities, and real estate as well as globally.

Here is a snapshot of the ETFs that Scalable Capital uses when building their client portfolios:

Once built, the portfolio is then adjusted as the target weights for each asset class gets out of line with the target model for the client’s risk profile and investment time horizon.

Scalable Capital Fees and Additional Pricing

Scalable Capital offers a simple fee structure, which covers all costs including investment management, trading costs, technology costs, and custodian charges for account management (keeping your money with a registered bank in the United Kingdom).

As with all robo advisors, the exchange traded funds that Scalable Capital uses also charge a management expense ratio (MER). The average MER for the ETFs used by Scalable is approximately 0.25%. This is paid directly by the robo advisor so investors will not see this fee come out of their accounts. 

Here is an example of how fees are calculated:

"…if your average account value over the month is £60,000, the fee would be calculated to be 0.75%*£60,000/12 = £37.50. The only other fee you pay is the built-in fee in the ETFs we trade. These currently average 0.25% and are taken out of the performance of the ETF. "

Compared to traditional fees charged by investment management firms of 1.5% and higher, Scalable Capital’s fees provide a cheaper alternative.

What we really like about Scalable Capital is that there are no hidden fees. There are no withdrawal fees, no exit fees, no deposit fees, and no lock-in period. They seem to really prioritise transparency by including all costs (except the ETF fee) in their management fee.

Scalable Capital Account Types Available

Scalable Capital offers clients an option to open General Investment Account (GIA) and/or an Individual Savings Account (ISA). If required, clients can open both types of accounts.

In addition, they have plans to offer a Self-Invested Pension Plan (SIPP) in 2017.

With all account types, Scalable Capital has made it easy to transfer money from existing accounts from other investment management providers right into Scalable’s accounts.

How to Get Started with Scalable Capital

The process to sign-up and get Scalable Capital is straight forward and follows the following process:

1. Using their online questionnaire, Scalable asks about your knowledge and experience, financial situation and investment objectives as well as your personal risk-appetite. 
   
2. The robo advisor then determines a set of investment strategies that would be suitable for you based on your risk profile and investment time horizon. 
   
3. An account is opened with Winterflood Securities, who is the custodian for the funds. 
   
4. Investment amounts are then completed via bank transfer to your account at Winterflood Securities. 
   
5. Scalable Capital invests your money based on the investment strategy determined above. 

Once complete, you will be able to constantly monitor investment performance via the Scalable Capital website 24/7. 

Bottom Line

Scalable Capital is a low-cost provider of sophisticated, globally diversified portfolios that are monitored by real humans. If you want the benefits of a robo advisor with the low cost, but also want en element of management from a real human financial advisor, then it doesn't get much better than Scalable. When you consider that their portfolios are fully personalised and come with no hidden fees, Scalable is a solid choice for any UK investor. If you're looking to self-invest then you're in luck as they're offering SIPPs accounts in 2017, likely making them the first robo advisor to do so.