DBS launches hybrid robo-advisor

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The bank takes aim at retail investors with robo technology and in Taiwan, Legg Mason partners to set up a robo-advisor.

The product was first offered to DBS’s private banking clients in March this year, and it is now being marketed to Singapore retail investors, and specifically targeted at “beginner investors”, according to a press statement.

DBS digi-portfolio will give investors access to between four and seven ETFs selected by investment professionals within the firm’s wealth management team and will be reviewed quarterly.

In contrast to conventional robo-advisory products, which typically use optimisation techniques, algorithms or artificial intelligence to construct portfolios, the role of robo technology for the digi-portfolio is confined to the trading cycle and administrative functions.

It is deployed to make the dealing process faster and cheaper than other products, so there will be no sales, platform or transaction charges beyond a flat annual management fee of 0.75%, according to the statement.

Nevertheless, the fee is high compared with those charged by conventional robo-advisors and for ETFs. For instance, robo market leader Betterment charges a flat 0.25%, while a typical  Singapore-listed ETF, such as Lion-Phillip S-Reit ETF, charges 0.50%, according to its fact sheet.

DBS explained that the fee will cover the costs of portfolio construction, monitoring and rebalancing to ensure portfolios “remain resilient to market volatility and provide optimal returns”, according to the statement.

FSA has been monitoring selected robo-advisory portfolios for the past two years, and continues to report on their performance every month. Their performance against their benchmarks have been mixed, but it is clear that Asia’s nascent robo-advisory industry is growing.

Fund managers, especially ETF providers, view them as an additional channel for distribution, while a number of wealth managers have entered into B2B partnerships with robo-technology providers to diversify advisory offerings.

The DBS product will offer investors Asia and global portfolio options.

The Asia portfolio will comprise Singapore-listed ETFs with exposure to Singapore, China and India, and it includes “excluded investment products”, which have terms and features generally understood by retail investors.

The global portfolio will be made up of UK-listed ETFs, providing “hyper-diversification for robust risk management, as well as exposure to to the US, Europe and Asia ex-Japan”, according to the statement.

Each portfolio in both categories is available at varying risk levels: from “Slow n steady”, “Comfy cruisin’” to “Fast n furious”.

The minimum investment is S$1,000 or $1,000, according to the statement.

Taiwan robo offering

Separately, Legg Mason Investments Taiwan (LMIT) and Cathay United Bank have partnered to introduce theme-based portfolios to Taiwanese investors, which will  be offered through Cathay United Bank’s robo-advisory platform, Cathay Robo.

A Legg Mason’s affiliate, QS Investors, a quantitative and multi-asset manager, will provide investment insights and resource to LMIT.

The partnership will offer two portfolios focusing on the themes of “income” and “industry”. The income-focused portfolio is designed to increase risk-adjusted yield for investors seeking a regular income stream while the industry-focused portfolio aims to capitalise on opportunities driven by positive momentum across various sectors throughout global markets while managing volatility, according to a media release.

There has been strong demand among Taiwan investors this year for income generating funds, especially fixed maturity products.

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