The rise of robo-advisory financial services in Singapore
We previously wrote on how redundancy is tipping the scale of employment in Singapore. We discussed the government’s action plan in helping jobseekers who were affected by the job market. Tough times are upon us.
One of the things shaking up the financial job market is robo-advisory services. Since our article in June, there are further developments in the robo-advisory scene in Singapore.
The rise of the machines
London wealth management company Crossbridge Capital plans to launch its first robo-advisory platform in Singapore later this year. The aim is to service high-net-worth individuals (HNWIs) with more than S$2 million in net personal assets using a platform that’s developed by Singapore’s B2B robo-adviser startup, Bambu.
This digital advisory platform empowers HNWIs to manage their investments at their own pace, without the expensive costs of now deemed old-school human operators. A spokesperson from Crossbridge Capital indicated that Singapore’s a crucial market that’s got fantastic potential for growth when it comes to an online investment platform.
It’s not the only robo-advisory service that’s about to be launched. Infinity Partners has also been in talks to launch a robo-advisor for its wealthy clientele. The initial targeted segment, American expats, would be able to build ETFs in the US.
Then, of course, there is Smartly. Aimed at the general investor, the robo-adviser will allow you to start investing with as little as S$50 on a monthly basis. You’d have 100% control of your money. The algorithms will analyse your risk appetite based on what you’ve keyed in. You’d then be lead to your personalised portfolio on a globally diversified mix of ETFs.
Why robo-advisory is hitting the right spot?
It will come as no surprise if the robo-advisory scene continues to flourish in the coming years. Boston Consulting Group’s study has made a prediction that APAC (excluding Japan) would strive past Western Europe with around US$55 trillion (S$76.28 trillion) in private wealth by 2019. That’s a probable 5% increase in Asia-Pacific’s global financial wealth’s percentage to 26% compared to where it was in 2014.
The simplified process is making it attractive too. Possible investors get to start small — S$50 is measly compared to the Assets under Management (AUM) requirements by most banks here. Then there’s the sign-up process that’s almost instantaneous.
Top that off with lower management costs and the transparency in monitoring the performance of your investments at any time, and it’s a sure-fire strategy.
How will robo-advisory affect the job market?
A survey by Legg Mason indicated that 59% of HNWIs under the age of 40 in Asia were at ease with using robo-advisers.
This graph from the BlackRock Global Investor Pulse Report, Morgan Stanley Research shows the percentage of respondents who showed positive signs towards robo-advice:
The younger generation is more open to alternative forms of getting financial advice. Wealth managers will have to push themselves harder to reach out to these segments before they can gain their trust and later on help them with financial growth.
Baby boomers are on the retiring end — they’re taking their money out.
In the words of Michael Spellacy, PwC’s global wealth management leader, the traditional financial model is being assaulted. The rise of less restrictive and cost-friendly robos are going to leave financial advisers in the lurch unless they improvise and improve themselves.
There are two possible ways of getting this done: costs would have to come down or the financial service provider would have to devise some attractive offerings. These are long shots and might or might not work.
One fact needs to be driven home though — robo-advisers won’t be able to do everything. There are certain aspects in the human approach that algorithms simply can’t cover. Wealth managers don’t just focus on the investments and numbers, but also work as financial life coaches. Looking at this, a face-to-face approach might have an edge over a smartphone’s screen after all.