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HK robo adopts hybrid discretionary feature

Yunfeng Financial is also planning to add China-focused funds managed by mainland managers on their platform, according to Li Ting, the firm’s CEO.
HK's non-ETF robo-advisor

Yunfeng rolled out its robo-advisory platform, Youyu Wealth, in 2017 in Hong Kong. Unlike most robo-advisory platforms available in the market, it makes use of active funds instead of ETFs. Since its launch, the firm has been focusing on app improvements rather than spending on a massive marketing campaign, Li said previously.

One of the latest developments in the platform is the “rebalancing feature”, which was just recently launched this year, Li told FSA in a recent interview.

The feature allows clients to customise the platform’s asset allocation recommendations. In addition, they can make changes at the fund level, replacing one product with another, so long as it is on the firm’s platform.

“Investors in Hong Kong have different preferences, and some want freedom. If you want to be a robo, you have to give people the flexibility to deviate from just [one recommendation].

Such features might be new for a robo-advisor in Asia. But in terms of private bank wealth management, several players have already launched similar services as discretionary portfolio management remains less popular than advisory.

Deutsche Bank Wealth Management, for example, launched this month a hybrid advisory platform, in which it recommends a multi-asset portfolio based on a client’s profile, though the client has the final decision to accept the recommendation. Clients are also able to customise the recommendations.

UBS Wealth Management was also one of the first to launch a similar platform, UBS Advice, which was first introduced in Asia in 2015. In 2017, it decided to bring the platform to other banks in a white-labelled version.

Risk limitations

Yunfeng’s Li noted, however, that clients of the firm’s robo have limits in adjusting their portfolios. Youyu Wealth generates seven risk profiles and clients cannot take on more risk than what was recommended in their own profile.

“You can have less risk than we recommended, but not more,” she said, adding that this goes for both at the asset allocation and fund level.

When making changes at the fund level, users will only see products that are suited to them. “So if you have the lowest risk profile, you won’t see any emerging market funds.”

Other developments include comparison of fund products in a category by performance data, volatility management and upside and downside capture information, she said.

Another robo-advisor provider in Hong Kong, 8 Securities, is also planning to launch a modified version of its platform. Mathias Helleu, Hong Kong-based executive chairman of the firm, said previously that the firm plans to launch a single app that will combine robo-advisory and brokerage services.

Adding funds

According to Li, Youyu Wealth’s platform has 450 funds compared to 350 in March last year. The number of fund houses has increased to 22 from 17 during the same period.

“We are still working to have more products on the platform. We want to add several China-focused products [across equity classes],” she said, adding that she is looking at domestic Chinese managers that have asset management subsidiaries in Hong Kong.

When asked about client demand, Li said that the market still needs more education.

“The market has a long way to go in terms of having a longer investment horizon and being more rational. There is also a long way to go for investors to trust [a machine].”

Li declined to provide AUM figures or the number of subscribers.

Echoing Li, 8 Securities’ Helleu also said previously that the market for robo-advisory services in Hong Kong has not yet opened wide.

“It is difficult to build a marketplace from scratch when none of the [huge market leaders, such as the banks], are participating.

Both firms are now spending resources on educating the public, with 8 Securities posting more investor education videos on its website and Yunfeng provides content on social media, such as We Chat.

Part of the Mark Allen Group.