Until recently, wealth management services were for the seriously rich. Each client received personalised advice on financial and investment matters, retirement and estate planning and even accounting and tax services. Of course, all these benefits didn’t come cheap.
Clients were expected to pay at least 1% of the value of their assets under management as fees every year. Many traditional wealth managers charged a lot more. But in recent times, a number of new financial technology companies have digitalized wealth management services and made them available to investors at a fraction of the rate.
Another advantage that these new fintechs or robo advisors provide is that an investor can start with a smaller amount of investing capital. Traditional wealth managers usually require a minimum portfolio of several hundred thousand dollars.
Singapore’s automated wealth management platforms
Several companies are competing to provide Singaporeans with specially designed portfolio planning and asset management tools. They are entering the market with financial products that allow young and tech-savvy investors an enhanced level of control over their portfolio. For a complete review of the best robo advisors in Singapore, please refer to our recently published guide.
Singapore’s robo advisors also have the advantage of offering their services at lower rates than traditional services like brokers or mutual funds. Investors looking for an alternative to the rock-bottom returns on banks deposits now have an option that allows them to allocate their funds in a manner that suits their risk appetite and costs little in fees. While not all of these offerings are yet friendly to an average person, we believe robo advisers will gradually put forth more consumer friendly products with low fees as they scale their platforms.
StashAway’s proprietary investment strategy, ERAA® (Economic Regime-based Asset Allocation), leverages macroeconomic data to minimise risk and maximise returns for every portfolio throughout different economic cycles. Your portfolio is reoptimized according to economic trends.
StashAway’s algorithm is able to deliver automated and personalised portfolios for you based on your risk profile and goals. Its fee starts from 0.8% per annum for your first $25,000 invested, down to 0.2% for any additional amount above $1,000,000. It requires no minimum balance, has no lockup period, and offer unlimited free withdrawal.
Furthermore, StashAway offers a diverse set of product lines such as SGD Income Portfolio and StashAway Simple, a zero-requirement cash management solution. It has recently launched its Thematic Portfolios, that allows you to gain exposure in promising long-term sectors Technology, Consumer Tech, Healthcare, and Environment and Cleantech, all while keeping your risk under control.
You also have the option to invest your SRS funds in all the aforementioned products, taking advantage of SRS's tax benefits while growing your retirement fund.
Consisting of Syfe Wealth, a digital investment robo advisor platform, Syfe adopts a Core-Satellite strategy to grow your wealth. It requires no minimum amount, and has no additional trading, brokerage or withdrawal fees. With a 0.65% annual management fee for most investment portfolios, it is relatively affordable for the convenience of zero lock-ins, auto rebalancing and dividend reinvestment.
Moreover, Syfe recently launched Syfe Trade, Singapore’s first neobroker. There, you can trade US stocks and exchange-traded funds (ETFs) at a standard low fee of USD 1.49 per trade. Currently, they are giving out five free trades per month for each user as an introductory offer, and a discount of USD 0.99 for other subsequent trades.
Endowus is a platform that allows individuals to invest using their Cash, CPF & SRS savings. With low management fees of 0.25%-0.60% for cash funds, and 0.40% for CPF and SRS funds, you can grow your money starting with a minimum account balance of S$1,000. Furthermore, they don't charge for transfers, withdrawals, account openings or closures.
Also, the new Endowus Cash Smart Ultra portfolio uniquely optimises investments to earn high yields while minimising risk. Its 1.8 to 2.0% yield target is the highest in the market among cash management accounts.
This startup is targeted at Americans working in Singapore. Subsequently, the firm will offer its services to Singaporean as well. According to a press report, the company’s initial customers will be accredited investors, meaning high net worth individuals and hedge funds. Infinity Partners has a capital market licence and its expatriate customers will be able to buy exchange-traded funds in the US.
The firm will offer its services at a fee that will be about 1% of the assets under management. This compares with 3% to 5% charged by traditional wealth advisors for similar services. Singapore’s accredited investors can start buying into ETFs using Infinity Partners’ robo advisory services from 2017. Subsequently, the company will expand into Hong Kong and Japan as well.
This firm has chosen to adopt the B2B route to market its robo advisory products. It is currently marketing a robo advisory platform that can be offered by financial service companies to their customers. Why is Bambu deviating from the usual B2C model that most robo advisory startups have embraced? In an interview, founder and CEO Ned Phillips explained that he estimates that it would cost his company US$1 million to acquire 3,000 customers. With the low fees that robo advisors charge, it would not be possible to sustain the business.
Established as a wealth management firm eight years ago, Crossbridge Capital has recently launched a robo advisory platform for Singapore’s accredited investors. The service has been introduced in association with Bambu. Accredited investors are defined under Singapore government regulations. They need to have net personal assets of at least S$2 million or a yearly income of S$300,000.
Crossbridge Capital has US$3 billion under management and caters primarily to HNIs and families based in emerging market economies.
The future of robo advisory services
Although robo advisory services have been popularised by financial technology startups, even financial institutions providing traditional wealth management services have much to gain from automated investment allocation methods. Singapore’s banks have already seized this opportunity. OCBC recently launched OneWealth, an automated system that provides investors with advice and monitors their portfolios. DBS Bank has partnered with IBM to launch Wealth Adviser, a service that matches research reports with a client’s risk appetite and investment objectives.
In Singapore, robo managers are not yet prevalent or scaled enough to offer a truly low-cost offering to most retail investors. While most of these platforms currently only cater to high net worth clients (i.e. accredited investors) and institutions, they likely will gradually expand their product offerings and lower fees as they grow. If the US market is any indication, a growing number of robo advisors can make these platforms cheaper, allowing Singaporeans to choose the robo advisory service that best meets their individual needs more easily.