Technology is disrupting everything. Uber and Grab have shaken up the taxi industry, while Airbnb provides accommodation in over one million rooms in 34,000 cities and 190 countries, without even owning any property.
But where is the drive to bring disruptive efficiency to Asia's burgeoning wealth management business? Until recently, when it comes to managing your money, the model has remained the same relationship manager-driven approach, but now that could be set to change.
"Robo-advisers" have become hugely popular in the United States. Digital wealth firms are offering increasingly sophisticated online tools to build and manage diverse portfolios at much lower costs than the traditional wealth management model.
Betterment, a robo-adviser in the US, is already managing in excess of US$6 billion (S$8.5 billion) in assets, and Swiss banking giant UBS recently made an investment in SigFig, another US robo-adviser.
BI Intelligence predicts that by 2020, robo-advisers will manage around 10 per cent of total global assets under management, a staggering US$8 trillion.
This is the Year of the Rooster, but it could be the year of the robo-adviser too, as investors in Singapore search for new ways to take control of their investments and gain access to actively managed funds and products, without paying the high fees.
Put simply, a robo-adviser is a tool to help you create and manage your investment portfolio online, and while there are many different models out there, most leverage technology to deliver four big advantages to their clients:
1. EFFICIENCY
Typically, robo-adviser fees are significantly lower than those traditionally offered to retail investors. In a world where fees for mutual funds, private banks and insurance companies can reach 5 per cent or more, robo-advisers all offer lower headline fees.
What's more, they do not tend to work on a commission model, and fees within robo products are usually more transparent too. Even small reductions in fees can make a huge difference to an investment portfolio, particularly over the long term.
2. CONTROL
Using a robo-adviser gives you complete control over your investments, you can decide when to invest and what your portfolio contains. Using modern and reliable technologies, investors can log on, tailor their portfolios and take control.
3. RISK MANAGEMENT AND ALLOCATION
Since robo-advisers know your risk profile and what balance of asset classes and investments you are looking for, you can be assured that your portfolio's risk level remains within your pre-defined limits. Even for actively managed funds, robo-adviser tools can help to automate these steps, keeping costs down.
4. TAKING A HYBRID APPROACH
You can still interact with a real, human adviser while embracing modern technology. Most investors are not quite ready to hand over their finances to a machine, and we all want reassurance that there is an expert to talk with in case we need them. This means that for younger generations, investing is generally demystified and older generations can invest stress-free.
Robo-advisers in Singapore
In Singapore, there has been a lot of hype around robo, though we have not yet seen many come to market. It is important to remember what drives demand for these tools and services. Customers are now more digitally savvy and are increasingly looking for transparent and cost-efficient financial advice that does not impact profitability.
Technology can help people invest more intelligently, and active management gives them access to greater returns while employing effective risk management and embracing wider opportunities - something that is very much needed in today's volatile markets.
Singapore has a large, digitally savvy mainstream investor market that is not fully served by the banks. The CapGemini Asia Wealth Report 2016 notes that 71 per cent of high-net worth investors here consider a firm's digital maturity an important factor when considering where to allocate their investments and which investment firms to choose.
The wealth market in Singapore, and more broadly in Asia, is booming. As a key wealth management market and a fintech hub, I can only expect interest to rise here and robo offerings to flourish. The country's vision for a Smart Nation will see a greater adoption of technology across various industries and will foster the kind of environment that will help robo-advisers develop and come to market.
An approach like using a robo-adviser, that gives you the investment portfolio you need more efficiently and conveniently than traditional savings and investments products, is only going to grow in demand. Twelve years from now, in the next Year of the Rooster, it will be interesting to see how this market has developed.
Will you be the one to set the trend among your peers?
•The writer is partner and head of digital strategy and distribution at Crossbridge Capital, which recently launched a digital advisory platform for accredited investors.
