The Case for Robo-Advisory and Digital Wealth

An April 2017 Burnmark report rexplored the tie-up between digital wealth and robo-advisory within the FinTech industry.With retail investors demanding for more complex asset classes and investments and increased transparency and control over investments, traditional wealth management firms, more wealth manage firms are joining the digital space and as a result, introducing automated wealth management tools called robo-advisors. Robo-advisory is also growing rapidly especially in exchange-traded fund platforms, said the Burnmark report.

They exhibit very different investment behavior with 64 percent of high net worth clients under 40 years old expect to access their accounts via a website and 54 percent expect to use digital channels such as mobile applications, social media or video. With their gender-specific investment needs, more women are also investing in digital wealth products.

Countries such as China, India, Russia and South Africa have large segments of millennial investors who are also keen to try digital advisory platforms. These niche markets do need micro-personalized products and services, while still being delivered cost-effectively, noted the report.

A common form of robo-advisory is the direct-to-consumer (D2C) robo-advisors. with limited advisor assistance. These are online platforms that provide automated, algorithm-based portfolio management and without intervention from human advisors. Business-to-business (B2B) advisory comprises white-label digital platform solution providers for traditional advisors enabling them to offer their own digital wealth management solutions.

There is also the hybrid advisory, which are traditional advisory services, including personalised conversations and actively managed portfolios blended with computerized portfolio recommendations.robo advisors

The US is the hub of D2C robo-advisors with two clear leaders, Betterment and Wealthfront, with assets under management of US$7.3 billion and US$5.1 billion respectively. Meanwhile, Bambu operates as a B2B robo-advisor in Asia, and within two months of launch has secured partnerships with Thomson Reuters, Tigerspike, Finantix, and Eigencat. Infinity Partners and Smartly aim to launch soon as the first platforms in Singapore, along with the new entrant women-focused robo-advisor, Miss Kaya.