The extent to which robo-advisers and the application of artificial intelligence (AI) is gaining any real ground in Asian wealth management is under debate. But there is certainly evidence of a challenge to the traditional investment approach.
Bhaskar Prabhakara, Founder & Chief Executive Officer, WeInvest
Alex Ypsilanti, Chief Executive Officer and Co-Founder, Quantifeed
Chandrima Das, Chief Executive Officer & Co-founder, Bento
Artur Luhaaar, Chief Financial Officer & Co-Founder, Smartly
Duncan Klein, Head of Product Management, BondIT
Chia Wee Kee, Associate Partner, Synpulse
There seems to be a misalignment of perceptions about where the Asian wealth management industry is currently at with digital, or technological advancements generally.
Although a hot topic of discussion continues to be how to consolidate and automate the investment process, the extent for the time being of any real disruption to the investment approach remains in question.
The majority of institutions across the region are still at a stage where they are digitising existing manual processes – while the public opinion seems to be that someone is on the verge of building a robot that will know where markets go.
What’s needed, agree industry players, is greater clarity over what robo-advice and AI is, and what its real potential to impact the investment function – not just distribution.
These were among some of the key observations of speakers at the annual flagship Hubbis Digital Wealth event in Singapore in June.
Finding the right starting point
Robo-advisory mostly gets analysed from a point of view where people ask if it is ‘better’ than existing solutions.
However, it also plays an important role in empowering and enabling people to invest, who couldn’t do so before.
Given that it is a completely new tool that offers functions and scale that hasn’t existed before, it’s more a case of the overall pie getting bigger – and less so of dividing up existing slices, say some fintechs and robo-advisory specialists.
One of the hurdles that robo-advisers face stems from the generally long sales cycle involved in selling enterprise software to large institutions.
Inevitably there are a number of challenges involved in deployment, integration and engagement.
Yet the majority of poll respondents still believe that banks should invest in partnerships with fintechs – instead of developing their own strategy.
The role of AI in robo-advisory, meanwhile, is much wider (but also limited) than the way it is currently being positioned.
However, despite the hype about AI, many industry professionals don’t really understand what AI is, in the context of wealth management, according to a poll of delegates.
Adapting and evolving
Some of the robos around the world which speakers highlighted for their superiority, have been successful for a combination of reasons that Asian-based fintechs can learn from.
For example, Betterment is cited as having a phenomenal user experience given the fact that it is simple and engaging.
The firm has also been open minded to adapt its business model. For instance, rather than stick to offering a purely digital experience, it has also hired financial advisers to access different segments and to improve the overall digital journey where more of a hybrid advisory approach is preferred by certain customers.
Making a real impact
For robos to really make an impact in Asia, some industry practitioners believe that the client voice needs to be heard much earlier in the process.
This will also help in making robo-advisory more useful in serving their real needs.
Yet the industry needs to keep in mind that from an investment standpoint, it is not a silver bullet for all market conditions, and arguably works better in trending markets, or over the very long term, when compared with active models.
But setting the matter of alpha aside, its primary value addition can be seen through the same lens that is used to settle an active versus passive debate – by recognising its risk-reducing role, as a complement to other solutions.
Also, robos should be regulated and audited like any other discretionary portfolio offering. This would subject them to fiduciary standards and duties of care.
For a digital approach to be innovative for the investment engine – and not just be about distribution – there is a growing view that the second or third generations of robo-advisers will have far better investment processes and utilise a wider range of products.
As a result, it seems like it will become more meaningful as AI improves. For the time being, however, digital is more about distribution.