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ETF robo advisor to launch in Hong Kong

The second generation of an ETF robo advisor by 8 Securities will be launched this quarter with lower fees to attract cost-sensitive investors.

The portfolio is made up of various ETFs listed in Hong Kong and is managed by iFast.

The overall charges will be cheaper than the old version’s 0.88% of the overall portfolio size per year, said Mathias Helleu, chairman and co-founder of Hong Kong-based 8 Securities. Minimum investment is HK$1,000 ($130) with no exit penalties.

The broker introduced Hong Kong’s first robo advisor in January last year and subsequently in Japan four months later. Investors are matched with different risk profiles after completing an online questionnaire, similar to the approach seen in the US, he said.

The new version is considered more user friendly. Investors are first asked to set some specific investment goals, for example, for buying a house, education, retirement, with expected amount of investments within a period.

Investors will be assigned to a portfolio that buys up to 10 Hong Kong-listed traditional type ETFs. The portfolio is managed by external iFast Financial, and “will be monitored and readjusted based on changing market conditions”.

ETFs are an inexpensive and efficient way for asset diversification, Helleu noted.

Will they catch on?

8 Securities cited a forecast by Boston-based research firm Aite Group that assets held by robo-advisors in Hong Kong are expected to expand from $400m in 2016 to $20.6bn in 2020.

However, the predicted 50x growth in four years is far higher than what is expected by other analysts, who believe the acceptance of roboadvisers in Asia will be slow.

The firm’s partner iFast eaid earlier that Hong Kong is still at the early stage in using online portfolio management. 

Helleu also admitted take-up is expected to be slow. “The big banks in Hong Kong are not particularly fast when it comes to adopting technology. The [development of robo advisor] might be a bit longer here,” he said. 

Part of the Mark Allen Group.