Robo-advisors use AI and other technology to spread investors’ funds over a wide range of different assets, after assessing their individual risk appetite. These wealth-management platforms also come with lower fees than traditional investment firms, and you don’t need a lot of cash to get started.
While robo-advisors are already well-established in the United States and Europe, the market in Hong Kong is relatively new. This is changing, however, as new platforms emerge and people become more comfortable with a digital approach.
At a webinar on 28 March, a panel of industry experts introduced their own platforms and discussed the rapidly growing sector. AQUMON and StashAway are already available in Hong Kong, while Syfe and Endowus, both based in Singapore, plan to launch here soon.
Hong Kong-based AQUMON was a pioneer in the local market after being licenced by the Securities and Futures Commission in 2017. Kelvin Lei, AQUMON’s CEO and Co-founder, said that it had been pretty lonely in the beginning, but the landscape was changing rapidly.
“Five years later, there is now a large network of robo-advisors,” he said, adding that he welcomed the newer firms to the Hong Kong market.
Besides serving individual investors, platforms like AQUMON also work with traditional financial companies to help them with their own fintech needs, Lai explained. “We also have institutional clients, and are providing solutions to the big banks, securities houses and insurance companies.”
Endowus CEO Gregory Van said he had been in a similar position to Lai when the company launched in Singapore, and agreed that more players in the market would benefit everyone.
The relatively low entry level for robo-advisors, in terms of the amount of funds required, was opening the market to many more investors.
“We have a whole spectrum of clients, from people investing S$1,000 (HK$5,800) to $10 million,” he said.
“All of them should be given fair service, which we are now able to provide at scale with the help of technology and access to a wide range of products. Your hard-earned money should work as hard as possible.”
While younger people are used to a digital-first approach, Van said that even the older generations are increasingly interested in robo-advisors.
“If you are aged 60 now, in 10 years’ time, I’d be surprised if you are not doing wealth management online.”
Dhruv Arora, CEO and Founder of Syfe, said that the recent growth in robo-advisors had come amid a broader digital evolution.
“In the last three years, there has been a tectonic shift of adoption across the board – for example, holding events on Zoom, rather than in person.”
There are two main trends he expects to see in the next few years: Firstly, investing will become a non-negotiable option, due to the current low interest rates and rising inflation.
“The second trend is hyper personalization,” he said. “As users get more savvy and more comfortable, they will look for more personalized solutions that are driven by technology.”
Stephanie Leung, Head of StashAway Hong Kong and Group Deputy CIO, said that as younger people start investing, this will grow the demand for digital options. This new generation also has a different attitude to how their funds are allocated.
“Younger people care about investment return, but they also increasingly care about the social cost,” she said. “They want to know – does the investment align with their beliefs, and does it work to make the world a better place?”
The traditional saving habits of people in Hong Kong and Asia present huge opportunities for robo-advisors. As Leung explained: “Around 45% to 50% of wealth in Hong Kong is sitting in banks. The ratio in the United States and Europe is in the mid-teens.”
But this mountain of cash also hints at the challenge ahead, as a major shift in mindset will be required to encourage savers in Hong Kong to part with these funds.
One issue is investors’ relative unfamiliarity with asset allocation. Lei from AQUMON noted that this method runs contrary to the traditional investment approach of individuals in the region.
“Asset allocation has a long history in U.S. and Europe. But Asia has a relatively young financial market, so the concept of asset allocation is relatively new,” he said. “A lot of investors, especially in Hong Kong, like to do their own trading.”
Van from Endowus said that more marketing by the robo-advisory firms will be needed to help people in Hong Kong to better understand the different offerings available at the various platforms.
“We need to collectively educate the market,” he said. “It might take time for people to transition. But we hope that, in the longer term, doing wealth management online will be like paying your utility bills.”
Looking more broadly at the Hong Kong market, the panel agreed that the city’s longstanding role as a global financial hub provides a solid foundation for the development of online wealth management platforms. StashAway’s Leung added that talent was very important for fintech firms.
“In the past 12 months we have built our team in Hong Kong, and the quality of talent here is amazing,” she said. “They are very well educated and very professional.”
In considering the prospects for robo-advisors in the near future, Syfe’s Arora noted how other online financial services, such as digital payments and digital banks, had taken off in Hong Kong in the past few years.
“We have seen the first wave of digital adoption,” he said. “Moving up to asset management, it will take time to build trust, but looking at how other sectors have developed is encouraging.”
Arora added that, overall, the wealth management sector is huge, and digital is still only a small fraction of it.
“It is still very early,” he said. “There is a lot of room for different players, and a lot of opportunities.”