Robo-Advisors Poised to Take Off in Singapore and Hong Kongby Fintech News Singapore September 19, 2016
Automated investing services, also known as robo-advisors, are growing rapidly as they seek to provide customers with low-cost portfolios designed accordingly to each investor’s risk tolerance.
According to Cerulli Associates, a financial services research firm, assets under management of robo-advisors will rise by 2,500% to US$489 billion in 2020 from US$18.7 billion in 2015.
One of the regions that will be driving this trend is Asia-Pacific, which is expected to surpass Western Europe and power most the private wealth’s growth for the next decade and beyond.
Given the region’s high Internet penetration rates, its large millennial population and the changing consumer behavior moving towards greater digitalization, Asia will likely drive the real growth of robo-advisors, predicts Credit Suisse.
John James, founder and CEO of Australian automated investment platform BetaSmartz has seen growing interest in robo-advisor in the Asia-Pacific region. “Australia was where the business evolved, but we are experiencing strong demand from the US and Asia,” James said in an interview with Finextra.
“Both of these markets are undergoing regulatory change and there is a shift from commission-based to fee-based services occurring with product manufacturers looking to control the digital distribution channel.”
Similarly, Ned Philips, the founder and CEO of Bambu, a Singapore-based B2B robo-advisor launched in February offering digital wealth services to businesses, said he has witnessed notable growth in the industry.
“We see digital adoption rising quickly and that will be great for consumers,” Philips said in an interview “We also have great faith in the Monetary Authority of Singapore (MAS) to help this sector in becoming more efficient and fairly-priced.”
Across Asia “people with small sums to invest don’t get a fair share of products and services,” he said, highlighting the need for affordable services. “It is clear that Robo Advisory will have huge beneficial effects, not just for experienced investors but also for those just beginning on the savings and investment journey. ” he said.
“We have seen there is demand across all sectors of the market, from private banks to mass affluent to mass retail for a B2B digital solution to offer their customers.” Ned knows what he is talking about having been in Fintech in Asia since 1999. He was previously Managing Director for E*TRADE in Asia, and he consulted for Asia’s first B2C Robo, 8 Securities.
In Singapore still, Smartly is about to launch a “next-generation robo-advisory platform” targeted at Southeast Asian millennials.
The startup has revealed earlier this week that despite having the product ready-for-launch, and having partnered with a domestic financial institution that has a capital markets services (CMS) license, the company is still undergoing regulatory review by MAS.
“A key area to fintech is the regulatory climate,” the company wrote in a blog post. “When handling people’s money, safety, security and compliance play an important role.”
“We have underestimated the time it takes to explain the bits and pieces of your platform to the financial regulator. As we speak we are in final discussions with MAS to clarify various aspects of Smartly.”
Mesitis is another player in Singapore which provides asset management and investment platforms.
Mesitis currently offers three products: Canopy, an account aggregation and report platform for individuals and their wealth managers; Bento, a bionic investment advisor; and Conduit Securities, a low-cost asset management and investment platform for Accredited Investors.
Earlier this year, it raised US$2.35 million from private investors. The company said in May that it would use the funds to staff up as well as to invest in technology.
Robo-advisors versus wealth managers
But as the robo-advisor industry matures, the trend will likely move towards collaboration than competition “and rather than the newcomers eating the lunch of the incumbent [wealth managers], a model of traditional advisory powered by digital capabilities is already emerging,” claims a research paper by Finextra.
“Advisors typically have too many clients to service properly,” Panos Archondakis, senior director, Wealth Management, EPAM, told the media outlet in an interview. “They cannot possibly process all the information required, such as data, market news, research and product recommendations, in order to give the same level of advisory service to each customer on their books.”
“Banks can leverage digital capabilities to process that flow of information and identify leads, opportunities, and recommendations that then can be provided to the advisor in a summarized form. And by addressing some of the operational and administrative workload the advisor has to get through just to have a client meeting, the automation of these processes will allow them to get in front of more clients with more relevant topics for discussion.”
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