The last two years have seen several robo advisor firms open up in Singapore. At the time of writing this article, none of them have secured a financial advisor or fund manager license from the MAS, so I haven't been able to try any of them yet.
Given that these firms are burgeoning in the various wealth management centres across the world, there's no surprise that the battle is being fought in Singapore as well. Before taking a deeper dive into the robo advisory landscape in Singapore, the key players and the incumbents - let's take a look at the state of wealth management in Singapore. Part 1 will cover the opportunities and challenges a robo will face when opening up shop in Singapore.
Quick Take: Wealth Management in Singapore
As of 2015, the total assets managed by Singapore - based asset managers grew by 9% to S$2.6 trillion (approximately $1.8 trillion) (MAS Asset Management Survey, 2015). Singapore is the 6th largest wealth management centre (Deloitte Wealth Management Centre Ranking, 2015). To start with, the profitability of the industry is on the decline with the industry profit margin falling to 24 basis points (bps) where 1 bps = 1/100th of a percent. An increase in the industry AUM (~ 7%) somewhat compensates the shrinking margins.
Quick Take: Financial Planning in Singapore
However, wealth management and private banking are meant for high net worth and ultra high net worth individuals (HNI/UHNI). What about the middle class or the mass affluent, individuals with a disposable income and a desire to grow their income. Enter, stage left - financial advisors. Financial advisors in Singapore don't have the best reputations. Many of them are poorly informed, out to make a quick buck, unable to clearly state their terms of engagement and insistent on pushing insurance linked investment products or mutual funds. Recently, 10 financial advisors were fined for cartel like anti - competitive behaviour. If you have a disposable income and don't qualify for private banking - this leaves you with few options:
- Open a brokerage account and manage your own portfolio.
- Buy Singapore Savings Bonds (SGS) as a stable investment and avail ~2% a year (if you retain your holdings for 10 years).
- Have your bank sell you a goals based savings plan that won't really help you earn very much more than the above.
- Invest in real estate. The major drawback here is the high down payment required and the longer hold period (I'm not talking about REITs here, just plain old brick and mortar buildings).
The Sweet Spot
Robo advisors aren't really for investment savvy individuals who trawl mutual fund/ETF offer documents, investor forums, and understand diversification. Robo advisors are for individuals who don't have the time to sit and worry about beating inflation (at the very least) by picking baskets of stocks, bonds or funds. Robo advisors are for individuals with limited time, a disposal income and little to no academic interest in finance or the way financial markets work, but with the desire to grow their nest egg by taking some calculated risks. In the next article in this series, we'll look at the challenges and opportunities robo advisors will have, in Singapore.