After establishing offices in Malaysia and Indonesia, Raiz is looking at entering the Thailand robo-advisory market, according to George Lucas, the firm’s CEO.
“We are already in conversations with the regulators in Thailand [about the requirements needed to launch a robo-advisory platform],” Lucas told FSA in a recent interview.
The firm plans to set up a joint venture with a domestic firm. Lucas explained that it is easier to navigate the regulatory landscape in Asia with a domestic partner.
“We have the technology to provide, but each country has its own financial regulations, so we need a JV as the domestic firms would be an expert in that area.”
Given that the firm’s plans in Thailand are in the early stages, Raiz doesn’t have an entry date yet.
In Thailand, a few robo-advisory platforms have launched, including Robowealth’s Odini and Finnomena’s Nter.
Malaysia and Indonesia
In Malaysia, Raiz signed a joint venture agreement with a subsidiary of Malaysian asset manager Permodalan Nasional (PNB) in May.
PNB is one of the largest fund management companies in Malaysia, with RM 298.5bn ($71.1bn) in assets under management.
The firm expects that the platform will go live at the end of the year, Lucas said, noting that it is still in the process of obtaining the relevant licences from Malaysia’s Securities Commission.
Unlike most robo-advisors that invest exclusively in ETFs, the firm initially plans to use mutual funds managed by PNB, given that it already has a partnership with the firm.
Other firms have already launched robo-advisory platforms in Malaysia, including Singapore-based Stashaway and Kuala Lumpur-based Farringdon Group.
In Indonesia, Raiz secured a licence to distribute mutual funds in December. The firm also set up a local joint venture, but Lucas said he would not name the partner because it is a family-owned business.
The Indonesia business opened in March and is expected to launch the robo-advisory platform by the third quarter. The platform will not invest in ETFs. Instead, it will make use of the products of a mutual fund partner in Indonesia, Avrist Asset Management, which manages around IDR 4.2trn ($298.6m) in assets.
When launched, Raiz hopes to have three million customers in Indonesia and 200,000 customers in Malaysia in the next three years, Lucas said.
Hong Kong and Singapore
Although Raiz has aggressive plans in Southeast Asia, Hong Kong and Singapore are not on the radar.
“It is mainly because of the scale that we require, which is the addressable market and population of a market,” Lucas said.
He finds that the addressable market, which is the potential number of individuals that are expected to use robo-advisory services, is too small in Hong Kong and Singapore.
Hong Kong has a population of 7.4 million, while Singapore’s population is at 5.6 million, according to data from the World Bank. The size of Hong Kong and Singapore compare to the sizable populations of Malaysia (31.1 million), Indonesia (267.6 million) and Thailand (69.4 million).
“Indonesia, for example, may not necessarily be, on a per capita basis, the wealthiest country in the world. But its addressable market is 60 million people, which is nearly the same size of the entire population of Thailand,” Lucas.
In Malaysia, Lucas believes the addressable market is 13 million (out of 31.3 million), which is still larger than the total populations of Hong Kong and Singapore.
Having a huge addressable market is important as the costs of maintaining a robo-advisory platform is expensive.
“In financial services, there are always compliance costs, which are very high. We have to do all the KYC and the AML, and there are also other providers that need to be paid,” Lucas said.
Crypto-robo?
In its home country, Australia, the firm is in discussions with regulators about the possibility of adding cryptocurrencies to the platform.
“We have been doing investigations into adding bitcoins in our portfolios, where they will be treated as an alternative asset class, so it will be around 5% of the portfolio.”
Raiz, which is listed in the Australian Exchange, manages around A$373.4m ($253.21m) in assets and has nearly 200,000 active customers in Australia, according to exchange filings.
