Southeast Asia’s digital advisors have attracted users and assets because of pandemic lockdown restrictions, but banks continue to hold the lion’s share of assets across many Southeast Asian markets.
Banks often serve as one-stop shops for investors as they provide more products, including loans and insurance, as well as priority banking services, concluded a report this week by Cerulli, a Boston-based global research and consulting firm.
Moreover, “it is hard to replace the bonds between investors and banks,” noted Shannen Wong, senior analyst with Cerulli.
Hence, some investors might still prefer interacting with their relationship managers, leaving robo-advisors more suitable for tech-savvy investors, although banks are likely to adjust their strategies and put more resources into building online platforms and investing in e-wallets.
“Although robo-advisors do not yet pose a significant threat to other distributors, they are helping to increase public awareness of the benefits of investing, which could, in turn, make it easier for banks and managers to sell their investment products to these investors in the future,” said Wong.
In part, robo-advisors and digital platforms are victims of their marketing strategies. Many of them target millennials or first-time investors with small investment amounts.
Nevertheless, “competition in the digital space is heating up,” said Wong, “with the entrance of players such as Grab and Australia-based micro-investment platform Raiz Invest”.
Singapore boost
In Singapore, the robo-advisory scene is blossoming, thanks to regulatory initiatives such as the central bank’s fintech regulatory sandbox. One of the latest entries is Endowus, currently the only robo-advisor in Singapore that offers investors the opportunity to use their Central Provident Fund monies. Unlike some robo-advisors, which typically offer ETFs, Endowus’ portfolios invest in mutual funds managed by professional fund managers.
Some players have also left the Singapore market. Robo-advisor Smartly said in March 2020 that it would shut down its business, less than a year after it was bought by Vietnam-based VinaCapital, citing intense competition.
At the same time, local banks have been boosting their digital advisory capabilities. In February 2020, DBS launched the DBS Portfolio Advisory Enablement Tool, and OCBC followed with its OCBC RoboInvest in August 2018, which includes 28 thematic portfolios covering six different markets.
“These digital advisory services, offered by local banks, appear to be targeted more toward young or first-time investors,” according to Cerulli.
Fierce competion
Elsewhere in the region, Indonesia has been the most successful in terms of digital outreach, with fund houses — including large foreign players — employing digital platforms to penetrate outskirt areas where their brands are less widely known. Yet, despite the growth of online channels, banks still account for more than half of mutual fund assets under management distributed in Indonesia, Cerulli research found.
The digital scene in Thailand is at an early stage, with just a handful of robo-advisors in the market. TrueMoney, the largest e-wallet in Thailand, partnered with Ascend Wealth, a mutual fund app operated by Robowealth Group, to expand into mutual fund investments in November last year, and aims to distribute more than 600 mutual funds from 10 managers in the initial phase. In the same month, Kasikorn Bank rolled out FinVest, an online wealth management platform, in collaboration with Lu International and Robowealth.
In addition to tapping third-party online platforms, many fund houses have developed their own online transaction portals. Kasikorn Asset Management (KAsset) reportedly has three digital channels, including its mobile applications K-My Funds and K Plus, as well as K-Cyber Invest, its online service for investment in Kasikorn mutual funds.
Eight companies in Malaysia have received a digital investment management license from the Securities Commission Malaysia (SCM). This is a fast-growing space—in 2020, according to SCM data, digital investment managers amassed MYR 466.2m ($115.4m) in assets, compared with MYR 74.7m in 2019.
“However, managers still see agencies and banks as their key channels in reaching out to existing and older investors,” said Wong, although domestic asset managers have been launching their own online platforms. BIMB Investment Management rolled out its Best Invest mobile app in April 2020, followed by Affin Hwang Asset Management and Hong Leong Asset Management, launching their mobile apps in January this year.
These trends suggest that “online platforms and robo-advisors will enhance distribution reach, rather than disrupt traditional distribution channels, in the foreseeable future,” said Wong.
