Have you read this article yet on finews.asia about OCBC Bank’s pilot robo-advisory service? I’m a big supporter of robo-advisors and this piece of news caught my eye. After all, I have been waiting for Smartly to launch since last year and was starting to wonder why it’s taking so long for competitors to show up. Especially when there should be demand for robo-advisory services from millennials in Singapore and considering how a robo-advisor for the ordinary retail investor continues to be unavailable despite the push towards fintech.
The important thing to note about the OCBC Bank’s pilot robo-advisory service provided in partnership with WeInvest: It will first involve Accredited Investors before being opened up to Non-Accredited Investors. The Monetary Authority of Singapore (MAS) defines an Accredited Investor to be a person that has net personal assets in excess of S$2 million. The value of his/her primary residence (market value less outstanding mortgage loan) can only account for up to S$1 million of this S$2 million. If a person doesn’t meet this requirement, he/she can also be an Accredited Investor if his/her income was in excess of $300 000 in the last 12 months.
This immediately locks out many retail investors from accessing the robo-advisory service at this stage. It’s funny how OCBC Bank can say this is a step towards the democratisation of wealth management but only offer this service to high net worth/earning individuals initially. You would think OCBC Bank could have offered the service to its bank customers for them to try it out first. Then again, it could have been MAS setting this only available to Accredited Investors first requirement.
Anyway, this is a summary of the mechanics of the robo-advisory service:
- Start investing from as low as S$3,000
- Selected participants can access the online platform and invest in 2 categories of investment portfolios
- The 1st category consists of five portfolios made up of Exchange Traded Funds (ETFs) and equities listed on the Dow Jones and Nasdaq
- The 2nd category consists of thematic baskets of stocks (e.g. technology companies) listed on the Dow Jones and Nasdaq
- Alerts will be sent to investors with proposals to rebalance their portfolios should economic and market conditions change
I can’t seem to find anything on the fees that the robo-advisory service will be charging. I’m interested to compare it to Smartly’s fee structure below so let me know if there’s further information on this:
- 1% annually for assets between S$0 – S$10,000
- 0.7% annually for assets with minimum balance of S$10,000
- 0.5% annually for assets with minimum balance of S$100,000
Smartly’s minimum investment amount is S$50, which is a lot less than the OCBC Bank pilot robo-advisory service. It’s obvious that Smartly is more tailored for the average retail investor but I’m wondering whether this is exactly what’s causing the delay in its robo-advisory service launch. I can imagine MAS being much more stringent on a product that is available to all investors versus one that is only available to Accredited Investors from the onset.
Competition in this space will benefit investors going forward as the robo-advisor providers will continue to improve their products and lower their fees to capture market share. But I cannot believe I’m still waiting for a robo-advisory service that I can actually use here in Singapore. I already have an idea of how much we will invest in the robo-advisor portfolio weekly, fortnightly or monthly depending on any contributions restrictions.
It would fit nicely into my wife’s automated investing strategy and should suit her well. It allows my wife to focus on work and either maintain or increase her salary income without having to worry about what and how to invest. Just a matter of transferring cash funds periodically into the robo-advisor portfolio and this could even be automated. Simple to execute with effective results over the long run. Which is exactly what my wife wants when she invests. Now when can we start?
Sinkie says
They’re offering this to AI’s for time being coz it’s much cheaper without the extra licensing costs & compliance costs & marketing costs to reach out to non-AI’s. To the bank it’s a risky & cannibalizing experiment as they think that robo-advisory’s success means eating into its traditional private banking & relationship manager business. They will only spend more money on it & open to non-AI only if there is good take-up among the AI’s. It’s kinda oxymoronic coz it’s like marketing Kia & Hyundai to the wealthy. They overlook (purposely?? Too KS & cautious??) the fact in US, it’s the middle-income that gravitates towards robo-advisories, not the AI’s or wealthy.
Finance Smiths says
These are good points that you are making. I didn’t think about the costs to reach out to Non-AIs and how the robo-advisory service could encroach into the bank’s private wealth management businesses. Yeah, not sure why the AIs would take up the robo-advisory service when it’s clearly more suitable for the mass market segment. Especially when you consider the minimum investment amount of S$3,000.
Rebeka Justin says
Basically . . . .Time-starved investors will be able to invest in diversified portfolios of stocks and ETFs, using automated, algorithm-based portfolio management advice. The platform offers a guided investment journey with the regular rebalancing of investments portfolios.
For newbie investors, the online tool recommends one of five portfolios made up of Exchange Traded Funds (ETFs) and equities listed on the Dow Jones and Nasdaq. Funds are invested based upon risk profiles and investment goals extracted from an online questionnaire.
I Say that Because I am also a Technical Analyst in Equity Profit. Actually, We are Serving live Trading Signals in SGX Stocks.