The Monetary Authority of Singapore released a consultation paper on Wednesday that should promote the adoption of robo-advisers.
The industry has been anticipating the consultation paper issued by MAS, according to Charlie O’Flaherty, partner and head of digital strategy and distribution at wealth management firm Crossbridge Capital, which launched a digital advisory platform last year.
“[The paper] provides a mechanism to ensure that the investing public is protected while also setting out clear rules for new fintech entrants to follow,” he said.
One of the regulator’s proposals is to waive the track record and AUM minimum requirements for retail-oriented robo-advisers that are operating with a fund management licence, the MAS said, noting that it is aware that some of these robo-advisors may not meet the minimum requirements.
Currently, to cater the retail segment, robo-advisors with fund management activities are subject to the same rules of traditional fund managers of having at least a five-year corporate track record of managing funds for retail investors in a jurisdiction that has a regulatory framework that is comparable to Singapore. In addition, firms should have a minimum S$1bn ($723.12m) in assets under management.
However, an exemption is subject to certain conditions, according to the regulator. Those conditions include key management having relevant experience in fund management and technology and robo-advisor-recommended portfolios that comprise at least 80% traditional ETFs.
Besides the minimum requirements for servicing retail investors, the MAS may grant robo-advisors case-by-case exceptions from the need to collect full information on a client’s financial circumstances when advising on traditional ETFs.
Examples of these financial circumstances are the clients’ employment status, source and amount of regular income and their current investment portfolio, including any life policy.
However, the regulator notes that the exception is only applicable to those robo-advisors that are fully-automated, where there is no human adviser intervention in the advisory process.
MAS also proposed guidelines on other areas, such as the management and supervision of algorithms, disclosure requirements to clients and licencing exceptions for financial advisers.
The consultation is open for a month until 7 July.
Similarly, Hong Kong’s Securities and Futures Commission (SFC) released a consultation paper on robo-advice last month, as reported. The regulator is asking providers of robo-advisory services to give accurate and sufficient information, such as a description of their services, how their models work and how portfolio rebalancing takes place.
SFC’s consultation is open until 4 August and there will be a 12-month transition period after guidelines are implemented.
