The Edge Markets | Giving Asian millennials access to global ETFs

Retail investors in Singapore, Malaysia and Indonesia will soon have access to global exchange-traded funds (ETFs) at a low cost with the launch of robo-adviser Smartly.

The robo-advisory platform, which is expected to be launched in the city state by year-end, will allow retail investors to buy into a portfolio of global ETFs for a minimum investment amount of S$50 and a fee of 0.5% to 1% per annum. Malaysian investors will be able to use this service by opening a banking and brokerage account in Singapore.

Smartly will help investors put together a portfolio of five to eight global ETFs based on their risk profile. These ETFs, which have generated returns of 4% to 10% over the past eight years, are delivered by international ETFs providers that track regional and global equity and bond markets.

The platform is awaiting final approval by the Monetary Authority of Singapore (MAS). “For now, retail investors cannot access our services and I am unable to disclose the list of ETF providers,” says Smartly co-founder and CEO Keir Veskiväli.

Veskiväli was invited to speak on “Robo-advisory services and managing investments digitally” at the SCxSC Digital Finance Conference 2016 on Nov 3 by the Securities Commission Malaysia. He says he will be meeting with the SC more frequently in the coming months to prepare for the platform’s launch in Malaysia. “I am looking forward to launch it here as soon as possible,” he adds, without offering a specific time frame.

The company is also making inroads into Indonesia as it has established a partnership with a bank there. However, the product offerings of robo-advisory platforms could be different when they are launched in Malaysia and Indonesia, says Veskiväli. That is because there are restrictions on buying foreign-listed ETFs in both countries. In addition, there is a lack of variety when it comes to local ETFs.

“If we are unable to trade foreign-listed ETFs in Malaysia and Indonesia, perhaps we can package the actively managed unit trust funds in a way that is different from the other market players that are in the business of distributing unit trusts online,” says Veskiväli.

“Our main focus will be to bring down the charges and minimum investment amount. We will also come out with our own product recommendation model and simplify the buying and selling process.”


From the left (Keir, Kentwell, Danielle, Artur)

He adds that robo-advisers have a lot of room for growth in Asia as it is a nascent market. “For instance, if you look at Betterment [the pioneer robo-advisory platform in the US], it grew US$2 billion in assets under management last year. Today, it has 200,000 customers and US$6 billion under management.

“Asia has huge room for growth if you benchmark it against what we have seen in the developed countries. The robo-advisory industry is still in the early stages here.”

While robo-advisers have been in the US and UK markets for several years now, few of them are accessible to Asian investors. But in January last year, Hong Kong-based online brokerage firm 8 Securities launched a robo-advisory platform called 8 Now! And a year later, THEO — the first robo-adviser in Japan — was launched by asset management and investment advice firm Money Design Co Ltd.

Veskiväli says the arrival of robo-advisers in Southeast Asia is expected to benefit millennials and encourage them to start investing. He points out that many tech-savvy millennials, who like to get most of their work and errands done using the internet, have been reluctant to invest because of the high fees imposed by asset management firms.

In general, asset management firms in Singapore impose a 1.5% to 5% sales charge and 0.5% annual management fee on investors. This compares with the 3% to 5% sales charge and 1% to 1.5% annual management fee in Malaysia.

“This gives millennials the impression that their returns are already down about 5% once they start investing, which is a lot. From this perspective, there is a lot a robo-adviser can do to bring the fees down,” says Veskiväli.

Smartly will charge a fee of 0.5% to 1% per annum, depending on the size of the investor’s account. Those who have S$10,000 or less in their accounts will be charged 1% while those with more than S$10,000 and S$100,000 will be charged 0.7% and 0.5% respectively.

Veskiväli says the performance of global ETFs is less volatile than actively managed unit trust funds because ETFs invest in a basket of stocks and bonds and track the movements of the markets globally. This ensures that the portfolios are well-diversified.

“Smartly’s portfolio invests in 5000 global companies in general. It is more diversified and less volatile than actively managed unit trust funds. This could give millennials more comfort to start investing,” he says.

Veskiväli says 2,000 people have signed up and are on the waiting list since he set up Smartly’s marketing page online. They will be able to access the platform when it gets the nod from the regulator. Many of those on the waiting list are Singaporean millennials.

One of the issues that he wants to address is the lack of financial education in the region. He hopes to do this with the Smartly education platform.

“The platform is a combination of Coursera (online course provider) and Candy Crush Saga (popular game app). People can sign up for free and watch the two-minute animated videos on basic investment topics such as what ETFs are, why investors should care about fees, and charges, and happenings in the financial industry,” says Veskiväli.

“After watching the videos, they can answer a few questions and get rewarded with stars. Each star entitles them to a small discount on the annual fee charged when they invest with Smartly.”

Read the full story here:


Leave a Reply

Fill in your details below or click an icon to log in: Logo

You are commenting using your account. Log Out /  Change )

Google photo

You are commenting using your Google account. Log Out /  Change )

Twitter picture

You are commenting using your Twitter account. Log Out /  Change )

Facebook photo

You are commenting using your Facebook account. Log Out /  Change )

Connecting to %s