Banks rev up robo-advisory push in Singapore

OCBC is the latest to roll out such service.

When OCBC Bank launched its robo-investment service called called OCBC RoboInvest in August, it sought to target younger investors by offering a relatively accessible initial investment of $3,500 and presenting a variety of investment "themes" that the bank said makes selecting an investment portfolio as simple as selecting a Spotify playlist.

"Just as they might pick a playlist using a digital music service, customers can choose from 28 diverse portfolios of equities and exchange traded funds across six markets, constructed based on themes like technology, real estate investment trusts, fast-moving-consumer-goods companies, property, healthcare and food & beverage," OCBC said in a statement.

OCBC’s foray into the robo-investment arena adds to the momentum already driven by existing players like StashAway, a Singapore-headquartered online investment management company and the first robo-advisor to receive a full capital markets services license from the Monetary Authority of Singapore (MAS).

"For StashAway, this is also good news as it will attract more attention to robo-advisors. We don't see this as a threat as we are confident that we offer a superior product at a lower price," said Michele Ferrario, co-founder and CEO of StashAway.

Ferrario reckoned StashAway stands out from other products in Singapore because of its sophisticated investment framework and cutting-edge technology. Another point of difference is that StashAway's portfolios are all diversified across asset classes, geographies, types of issuers and maturity. "There are no 'themes' to choose for customers. Through our goal-based advisory tool, we see most customers building retirement portfolios, taking a long-term view and investing monthly to build their wealth," said Ferrario, adding that StashAway offers "significant" cost advantage compared to the newest offerings of OCBC.

CGS-CIMB Securities launched a robo-advisory platform called CGS-CIMB eWealth in late August provided in partnership with Saxo Bank subsidiary Saxo Capital Markets and WeInvest.

Like other robo-advisory platforms, CGS-CIMB eWealth uses algorithms to help the regular rebalancing of clients' investment portfolios. It also requires an initial minimum investment of $3,500, and offers thematic investing options such as "US Refining" for investors that want to invest in companies that will likely benefit from rising oil prices and "S-REITs" for investors that want to own a variety of individually listed REITs.

In a sign that more providers are looking to enter the space, the MAS earlier said that it has received "indications of interest" from new entities seeking to offer digital advisory services to retail investors. “The availability of digital advisory services will widen investor choice to low-cost investment advice,” the central bank said.

The cumulative assets under management held by Singapore's robo-advisors segment were worth US$1.75b in 2018, and is expected to grow at annual growth rate of 44% to hit US$7.61b by 2022, according to Statista data. The number of Singapore users is also expected to climb to about 405,000 by 2022.

The strong pace of growth is partly driven by regulatory support. Based on the consultation paper the MAS released in June, digital advisory firms will not be separately licensed but instead will be offered significant concessions. Digital advisers who go the fund-management route and target retail investors, for example, are proposed to be exempted from meeting the five-year corporate track record and minimum assets under management requirement of $1b.

However, digital advisory firms must comply with safeguards such as maintaining portfolios that are diversified and comprise non-complex assets. Firms must also hire key management staff with relevant collective experience in fund management and technology, as well as undertake an independent audit of the business within a year of operation.