How robots are changing financial advice in Asia
Robo-advisory is reshaping financial advice in Asia where the younger generation of wealth management clients offer solid business opportunity.
18 Oct 2016 | Darryl Yu
Robo-advisory is reshaping financial advice in Asia where the younger generation of wealth management clients offer solid business opportunity.
Unlike traditional human financial advisers, robo-advice is low cost and provides investors portfolio recommendations based on responses from an online questionnaire. It gives the user not only insight into how they should allocate their assets but also a sense of privacy when handling their finances. “If you look at robo-advisers particularly in the US it’s about a low cost environment,” explains Alex Medana, chief executive officer of WIP Solutions. “Financial advisers are very expensive. You could have an opportunity to displace them.”   
The robo-advice service in particular has a chance to flourish with millennials (persons aged 18-34) who tend to be more tech savvy and are aware of the advantages planning ahead financially. “Robo-advisers are mainly targeting millennials who are people that were born into technology and the internet,” says Keir Veskiväli founder & CEO of Singapore-based robo-advisor Smartly. “They [millennials] use technology a lot more differently than generation X.”  
While the US has led the charge in robo-advisory space for companies such as Wealthfront and Betterment, Asia has stood out as another prime location for robo-advice due to the growing prominence of the region’s millennial segment. Already millennials make up half of the population in India and just under a quarter of China’s population.
On a wider level, robo-advice also allows for greater investor participation into capital markets. “Much of the initial uptake and interest in robo-advice is coming from the “mass-affluent delegator” market segment which has traditionally been underserved,” states a report from professional services company Accenture. “We expect discount brokers to use robo-advice to push further into advice delivery while leveraging their traditional direct engagement model.” Currently traditional mass-market retiring investment vehicles such as savings accounts and certificates of deposits no longer yield the returns they once did so investors are on the hunt for better investment options.
“Access means that every retail customer would have the same tools that an institution has to buy stocks,” notes Mathias Helleu, executive chairman at 8 Securities, a Hong Kong-based robo-adviser. “Things change, technology now has reduced the execution of the trade to the bear minimum. It’s time for companies that don’t have as much legacy to challenge the status quo.” Under Helleu, 8 Securities created “Chloe”, a digital assistant used within 8 Securities’ platform. “She [Chloe] is there to help you through the process, at least that’s our vision,” states Helleu. “Chloe will be designed more around goals in the future.”      
Key issues
Despite the industry enthusiasm around robo-advice, Asian financial regulators still need to clarify AML (anti-money laundering) and KYC (know-your-customer) rules before most retail investors become comfortable to regularly use this service. However, that’s not to say regulators are ignoring this emerging trend, this March for example Singapore’s MAS (Monetary Authority Singapore) announced the central bank's plans to use API (application programming interface) processes, a procedure that makes it easier for third party entities (such as robo-advisers) to connect with government systems. “I think the main thing is still the regulatory side which is holding robo-advisers back,” states Veskiväli. “We’re moving in the right direction, I think in the case of Singapore we are seeing the MAS supporting this [financial technology] movement but it’s going to take some time. I want to work with the regulator to show them that the product is really simple and that technology is there to move forward.”
 
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