Zheng’s robo-advisor targets mainland-based financial institutions and its clients include Minsheng Securities, Anbang Finance and Harbin Bank. He was speaking on a panel at the Hong Kong Investment Funds Association’s annual conference yesterday.
He dismissed the notion that robo-advisors are in direct competition with human financial advisors, let alone a replacement. “Human judgment is full of complex emotions and impossible to be replicated with computer programming,” he said.
A more significant outcome of robo-advisory systems entering the financial industry is their ability to improve cost efficiency at financial institutions. Their contribution is more than simply calculating the portfolio’s risks and advising the best-performing stock, he said.
“Since investment transactions through banks and intermediaries need to comply with complicated regulations, automated systems can read the complicated legal documents and generate the relevant terms in just one click,” he explained.
Despite their increasing use by retail investors, robo-advisers will eventually find a place as a supplement to the asset management industry, he predicted.
China robo regs
Last week, Chinese regulators jointly published a set of new guidelines for the asset management industry.
Among the 29 suggestions, “any application of robo-advisors in business development of an asset manager” will be obliged to obtain approval from the financial supervision authority. Robo firms will have to demonstrate the design, including the way information is provided to the client, the algorithm, programming and the asset allocation fundamentals.
Zheng said the industry has to wait for further clarification of the details. For instance, given that robo-advisory service providers seldom directly engage in product sales, the document did not specify if robo-advisors should be subject to the same regulations on product sales as traditional asset managers.
Another panelist at the Forum, Gang Wang, team leader for wealth management at the Bank of China in Shenzhen, argued that fund distribution efficiency will increase through robo-advisors. “Auto-generated messages are sent to clients instantly after the product’s performance metrics touch the pre-set thresholds. It largely alleviates the pressure on the sales team,” Wang said.
