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Mainland fund investors keen on robo-advisors and digital channels

Almost three-quarters of mainland investors said they are likely to try using a robo-advisor, compared to one-third for their Hong Kong peers, according to a Hong Kong Investment Funds Association survey.

HKIFA polled 950 fund investors about their views on the fund transaction process and the use of robo-advisors and other digital means. About 70% respondents were from Hong Kong and the rest from mainland China.

First, on the perceptions of robo-advisors – which aim to provide financial advice and portfolio management with minimal or no human intervention – only 22% of Hong Kong investors were aware of such concept, compared to 54% for mainland investors.

The top three reasons to use a robo-advisor included: to save time, convenience, and more objective advice.

“It seems that Hong Kong investors attach much importance to human interactions in the transaction process and thus the perceived lack of human touch in an RA environment has deterred them from embracing RA readily,” it explained.

Nearly half of Hong Kong investors express the need to talk to relationship managers or advisors before making investment decisions, while 44% of them indicate that they feel insecure because of the lack of human interactions and some flag that if mistakes are made or problems arise in the process, there is no one to reach out to. 

“All these remarks are underlined by the general need to have a human touch,” it said.

Asking about the preference of an online fund distribution platform, more interest was shown from mainland investors as well. 

The Securities and Futures Commission said it will start consulting the industry on online fund distribution soon, while the government has been in talks with the Hong Kong Exchanges and Clearing, the local bourse, to set up an exchange-based platform for selling funds.

The likelihood of using a fund platform operated by HKEx

 Age  Hong Kong investors  Mainland investors
 30-34   35-51   52 or above  30-34   35-51  52 or above 
 Very likely   12%  10%  6%  12%  31%  28%
 Somewhat likely   47%  42%  38%  68%  40%  64%
 Neither nor  36%  43%  38%  19%  27%  6%

Source: HKIFA survey

Respondents also expected that the commissions charged would be lower than the traditional channel by at least 30-50%.

The trends in the survey echoed the investment behaviour of the investors in these two markets: 54% of Hong Kong investors and 78% of mainland fund investors indicated that they had made use of the online channel in the most recent fund purchases in the past 12 months.

About 44% of Hong Kong investors cited a bank’s relationship manager as a key source of information, versus 28% of mainland respondents.

Meanwhile, 22% of mainland investors said online information is a main source, compared to 14% of Hong Kong ones. 

“One of the key priorities of the Association in the coming year is to work with the regulators and the industry to further streamline the fund transaction process, seek greater clarity in online trading regulation – including but not limited to solicitation/recommendation and suitability,” said Arthur Bacci, HKIFA chairman and also head of Principal International (Hong Kong), in the statement.

“The objectives are to broaden the distribution options for investors, increase access of mutual funds, lower investor costs, enhance investor experience and ultimately to enable Hong Kong and mainland investors to effectively use mutual funds for their retirement and other financial management purposes.” 

Part of the Mark Allen Group.