Scalable Capital Investment Planner VaR 15%

Review of Scalable Capital Robo Investing: Opening an Account

Note: This review is totally independent as I'm not paid anything by Scalable Capital​. Also this is not a recommendation, seek independent financial advice if you want a professional to judge whether robo investment is suitable for you.

I've just opened an account with Scalable Capital which is one of the UK's largest robo investors. I've recorded the whole process step-by-step so you can see exactly what's involved.

As with any robo investment platform the first thing you do is to take a risk questionnaire that matches your risk appetite with their stock portfolios. Now what really sets Scalable apart in the robo fund space is that the minimum investment is £10,000 so it's certainly not for everybody. Their management fee is one percent: that's broken into 0.25% for the ETFs in which they invest on your behalf, and 0.75% of that is what they receive as asset managers. Here are the steps I went through. I hope you find it useful.

Scalable Capital Investment Objectives

The onboarding process launches straight into the risk questionnaire. The option I've chosen is to build my wealth moderately. Scalable's approach to investing is risk-based, so you have to say what size of fluctuation you're willing to consider. The greater the return you want the greater the risk you have to tolerate. For the highest risk category you have to accept 20% fluctuations in the value of your investment. I'm getting on a bit so I chose 10% to 20%.

Scalable Capital what is the time horizon for your investment?

Then I have to choose an investment horizon and I think ten years is fine for me.

Scalable Capital how much negative performance would you accept?

How much negative performance would you accept in a bad year? Well, I was investing through the year 2008 and 2009 and during that period the stock markets fell by about fifty percent. A typical market correction is about 10% to 12%, so I think 25% would be something I'd be willing to tolerate so I'll take their default setting. Notice the risk warning. They say that the risk of loss is not to be mistaken with a maximum possible loss because of course you could lose your entire investment if we were to have a catastrophic market event and that's why everything's phrased in terms of probabilities.

Scalable Capital In which asset classes do you have knowledge/experience?

Now they're trying to assess my knowledge and experience so they're asking which assets I have experience with and they actually ask for the number of transactions in the last five years. Now of course I used to be a strategist so I've got experience of all of these asset classes but on purpose I trade very infrequently so I'm not sure this reflects my experience but still, I'll fill it in as they say. There we are.

Which of the following investment services have you previously had interactions with?

Which of the following investment services have you previously had interaction with? Well I used to advise the advisors. I've signed up to Nutmeg so I suppose I have used an investment manager and I certainly have traded financial products myself.

Scalable Capital What is your regular net monthly income?

​What's my regular net monthly income? Easy: zero.

Scalable Capital What are your regular monthly outgoings?

​Monthly outgoings? Yes, about 1,800.

Scalable Capital What is your net worth?

​Excluding property I'd say my net worth is about 150 k.

Scalable Capital How long will your emergency capital reserve cover your monthly costs?

My emergency cash reserve will last more than six months.

Scalable Capital Investment Planner

​So here they extrapolate the value of my account based on a 50k investment and a 300-pound monthly deposit. I won't be making monthly deposits. My initial investment will be considerably less than that, let's say it's their minimum of 10 K and you can see that over five years the most likely value of the portfolio will be just under fifteen thousand pounds and as an annualized return that's about eight point one percent per year for five years. And you can see the allocation of the portfolio here at the bottom currently the portfolio allocation is about sixty percent in stocks and that's quite a high risk portfolio.

Scalable Capital VaR Definition

​The risk category they've chosen is for 18% VaR so if I hover over the information bar it tells me "What is VaR?". VaR stands for Value at Risk this is the one in twenty year loss that you'd expect, so an eighteen percent value at risk means that one year out of every twenty my portfolio would lose about a fifth of its value. And that value of risk of eighteen percent came from the risk questionnaire which I completed.

Scalable Capital Investment Planner VaR 15%

​Now what it doesn't say is whether I'll be locked into this risk category for the lifetime of my investment so what I'm going to do is dial down the risk. And you can see that the return of my portfolio has decreased as well. Because i'm taking a lower risk I'm willing to accept a lower return.

Scalable Capital Asset Allocation
Scalable Capital ETF Allocation

​Now I can look at the portfolio allocation in terms of asset classes or which ETF that they're going to buy. You can see that their US stock allocation is fairly high at fifteen percent, and Europe's not far behind at twelve percent but there's also a very big allocation to UK government bonds. And these are the average weights of an indicative portfolio where that average is taken over the last 15 years.

​I'm fairly happy with these settings so I'll carry on. Now i'm going to enter some personal details which, of course, you won't see! And then we'll rejoin the onboarding process.

Scalable Capital Onboarding Complete

​Okay, so that onboarding process is now complete. It was very straightforward, it didn't take very long. They did require a lot of personal details: things like my national insurance number, the number of children I've got and my net worth. I'm not convinced they need that information in order to manage my money but that's the only real issue I had with the onboarding process.

​So overall a very slick process, a nice interface, the risk they came up with was a little bit too high, I think, but the whole process was very well explained and very clear. The minimum investment amount is 10k so if you're not willing to commit that kind of money Scalable Capital is not for you. But they do seem committed to low cost investment using ETFs with a risk-based approach which I liked very much and, so far, I'm very happy with my Scalable journey.

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March 30, 2017
ramin

Investment coach, financial author and founder of PensionCraft. Ramin wants to share his knowledge of how to succeed in long-term investment by keeping fees low, understanding behavioural investment pitfalls, knowing how to read macroeconomic indicators and understanding and controlling risk.