This publication recently spoke to the digital advisor business about prospects and what it thinks of the potential for further "robo" wealth growth.
Singapore-based robo-advisor Bambu, which targets mass-affluent clients, has more than 100,000 customers and wants to onboard 1 million customers over the next two years, its chief executive and founder says.
There is a segment of the wealth management which comes under the HNW category but above the retail segment, and this cohort contains the HNW clients of the future. Nurturing it and serving it makes plenty of sense over the medium term.
In December last year Bambu, Apex Clearing and US asset management titan Franklin Templeton collaborated to bring out Tango, a turnkey robo-advisor that gives advisors the ability to provide personalised, goals-based wealth management at scale.
“The end-customer will get a digital wealth journey to build and invest in their own financial goals. The platform is targeted at consumers with $50,000 to $200,000 in assets under management and who are best served with digital,” Ned Philips told this news service recently.
The digital wealth space – definitions can vary – is already large and growing. A number of commentaries say that, globally, the digital market will manage trillions of dollars in assets in coming years. One report from last year (Daily Fintech, 16 June) said that total AuM was just under $1.0 trillion and could reach $2.4 trillion in under five years from now, given a compound annual growth rate of 26 per cent).
Digital platforms have often targeted the mass-affluent rather than the HNW and ultra-HNW end of the spectrum, although the lines blur. A report by Boston Consulting Group issued last year said that the mass-affluent market should be tapped as a new source of growth. In Asia, Ant Fortune, part of Ant Financial, has taken aim at this space; in the US, Betterment and Wealthfront are important players. Another example from Singapore is StashAway, which this publication interviewed recently.
Robo-advisors have their critics. In 2017, Mark Carney, governor of the Bank of England at the time, voiced his concern that these platforms, using algorithms to buy or sell assets based on pre-set risk tolerances, could actually encourage “herding” behaviour in markets, leading to dangerous one-way bets in the market.
The field is still relatively young, as noted in an academic paper for the University of Maryland University College (13 February 2020). The author argued that the term “robo-advisor” is misleading. “The algorithm doesn’t advise an investor it is merely a financial instrument, a tool, a function, that is fed with inputs, in this instance the client’s answer to a questionnaire, therefore, investors should be given the option to exercise their own due diligence by manually accepting the recommendations offered by the algorithm and not automatically invest the client’s assets.”