Digital wealth management platforms are gaining popularity in Asia as technology-savvy high net worth individuals (HNWIs) demand greater transparency, speed, and lower costs for investment products they buy for their portfolios.
The main risk for HNWIs is identifying the platform that is most suitable for their risk tolerance and investment requirements.
There is currently a range of digital wealth platforms in the market, from that of a traditional private bank which only offers a log-in account that allows wealth advisory but no direct access to trading, to purely digital platforms offered by fintech wealth managers where everything is done online. In between, there are different options.
In Asia, younger HNWIs who are generally more tech-savvy, are showing a preference for platforms that offer a wider range of services, are completely digital, but have oversight from regulators.
“High net worth investors demand transparency and when you look at many of the products the banks are selling, they are lacking in transparency. Wealth management platforms can provide greater transparency, as well as faster turnaround and servicing times, and lower fees,” says Stephanie Leung, head of Hong Kong at StashAway, a digital wealth platform launched in 2017 with US$1 billion in assets to date.
The platform recently received a licence from Hong Kong’s Securities and Futures Commission (SFC) but is also regulated by the Monetary Authority of Singapore (MAS) as well as regulators in Malaysia and the United Arab Emirates.
One difference between a traditional private bank/wealth manager and a fully digital wealth management platform is that the latter, by using technology, can set up a portfolio that will drill down into the risk parameters of an investor and adjust the allocation of the portfolio depending on market developments.
“What technology allows us to do as a digital wealth manager is that we can identify an investor’s risk profile at a very granular level. We have what we call the Stashaway Risk Index which is a number that specifies exactly what is the risk you want to take in your portfolio, ” Leung says. “In terms of rebalancing, we do this on a daily basis. If the target asset allocation of the portfolio exceeds a certain threshold, the rebalance is triggered automatically (real-time). We are able to achieve daily rebalancing by leveraging first-class technology, while most fund managers usually do this on a quarterly basis.”
As an SFC-licensed fund manager, StashAway manages discretionary portfolios on behalf of its clients using active asset allocation with exchange traded funds (ETFs) as the underlying assets. It currently has 33 US-listed ETFs that have been vetted by its investment committee.
Leung recommends that HNWIs take a holistic approach when using digital wealth management platforms. This approach may involve using more than one platform depending on the investment requirements, the underlying asset class, and risk profile of a particular HNWI.
“We advise our HNWI clients on what is the right way to allocate their portfolios across different asset classes. We’re not doing this to sell financially but we recognize that there is a need for this kind of advisory service and because we believe that this is best way to invest. We don’t do stock picking and we don’t do short-term market timing,” Leung says.
StashAway fees range from 20bp to 80bp on a sliding scale with no minimum balances and no lock-ups.