Singapore Financial Watchdog Proposes New Rulings To Facilitate Growth Of Robo-Advisors

Singapore Financial Watchdog Proposes New Rulings To Facilitate Growth Of Robo-Advisors

by June 9, 2017
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The Monetary Authority of Singapore (MAS), the city-state’s financial watchdog and central bank, has proposed several regulatory changes aimed at boosting the growth of robo-advisors in Singapore and support innovation in financial services.

mas singaporeThe new proposals were presented in a new consultation paper released earlier this week. Called Provision of Digital Advisory Services, the paper addresses the many advantages of digital advisors, also known as robo-advisors, and proposes amendments to Singapore’s legislations in order to facilitate the provisions of these services in the nation.

MAS indicated that digital advisory firms will not be licensed separately and will be offered significant exemptions.

In particular, digital advisors that operate as fund managers under the Securities and Futures Act (SFA) will be allowed to offer their services to retail investors even if they do not meet the track record requirement, provided they meet certain safeguards.

These safeguards include:

  • Offering diversified portfolios of non-complex assets;
  • Having key management staff with relevant collective experience in fund management and technology; and
  • Undertaking an independent audit of the digital advisory business within one year of operations.

Digital advisors that operate as financial advisors under the Financial Advisers Act (FAA) will not need an additional license under the SFA to assist their clients to execute their investment transactions and re-balance clients’ investment portfolios in collective investment schemes. This licensing exemption will also be available to non-digital advisors as well.

Furthermore, digital advisors can seek exemption from the FAA requirements to collect the full suite of information on the financial circumstances of a client, such as income level and financial commitments.

Providers of digital advisory services will be required to manage the new technology risks associated with these activities. Hence, MAS has set out expectations on the governance and management oversight to be adopted by these providers.

These include the need to put in place a robust framework governing the design, monitoring and testing of algorithms, as well as having adequate board and senior management oversight and compliance arrangements to monitor the quality of advice provided.

MAS invites the public to submit their views and comments on the proposed regulations before July 07, 2017.

 

Robo-advisors surge in popularity

Singapore Consumers Growing Fond of Robo-Advisors

Image by Willyam Bradberry via Shutterstock.com

Globally, robo-advisors have surged in popularity notably among the growing segment of tech-savvy and self-directed consumers.

Robo-advisory firms use automated, algorithm-based tools to offer advice on investment products and planning, and operate through digital channels. Two types of digital advisors exist: those that financial professionals use to help them service clients, and those that clients can use directly.

In Singapore, several players have emerged in recent years. Notable ones include Smartly, a service targeting Southeast Asia’s millennials, Bambu, a B2B robo-advisor firm, as well as a StashAway, a startup that recently raised US$2.15 million from the Rozario family.

In January, Miss Kaya unveiled the first robo-advisor service in Singapore targeted at women in the region. The new service, which has Marvelstone Capital to act as its fund management company, is currently available to high net worth individuals. The company plans to expand to retail investors in the near future.

When it comes to fintech, Singapore is known for being one of the most supportive jurisdictions in the world. The government’s efforts to boost financial innovation and create a favorable environment for growth and development have enabled the city-state to be recognized as world’s top fintech hub – alongside London – by Deloitte.

 

Featured image via Pixabay.

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