There has been a ton of news surrounding Robo-Advisors in Singapore recently. This article serves to be a simple and accurate introduction to what this means and includes a detailed comparison between the 3 main players in the Singapore market. (as of 21 August 2017)
What is a Robo-Advisor?
In the past, mutual fund managers basically pulled together funds and charged a hefty 2-3% management fee for trying to beat the market. The fees usually eat into returns in the long run and thus the ones who benefited ultimately were the fund managers. Robo-Advisors aim to change that.
The Promise: Low-cost Diversified Passive Investing
- Low Cost: Usually 0.5% to 1% fees are charged for total amount managed (because they are run by models and algorithms behind instead of fund managers, hence the word ‘Robo’)
- Diversified: Usually put into a basket of Global Exchange Traded Funds (ETFs) which exposes the fund to the global economy in different sectors in some form of a mix of equities and bonds. Some of these ETFs are not available to retail investors.
- Passive Investing: A longer-term approach to growing wealth rather than high-frequency trading and taking short-term positions.
The target market is the time-starved working adult with income and looking to grow their money passively (the bulk of Singaporeans today aged between 21 to 45). Rather than going down to the bank to look for a relationship or fund manager, why not engage a more transparent way to grow your wealth.
TL;DR: The Robo-Advisory Review Winners
After over 20 hours of research based on a user perspective, here are the top picks in the respective categories we rated each Robo-advisor. Important Note: We are NOT sponsored nor do we get referral fees for promoting any Robo-Advisor.
|Best Functionality||StashAway & Smartly|
|Best Team + History||StashAway|
Again if you compare all the Robo-advisors against the traditional hedge fund managers, they all would do better with regards to User Interface and lower fees. We decided to omit the FSM MAPS and POEMS Smart portfolio which behaves more like a risk-based unit trust portfolio recommendation rather than a Robo-Advisor. You can read more regarding how we benchmark each Robo-advisory below. The cheapest pricing does not mean that it is the best, especially for investment solutions. 😀
The Three Contenders
Disclaimer: This article does not constitute as financial advice but rather is seen as an unbiased comparison between the three players in the Singapore market today.
- History: Started in 2016 by ex ZALORA Group CEO, Michele Ferrario and ex Nomura MD, Freddy Lim
- Funding: $4m+ with investors including high net worth angels and Francis Rozario (from CITI)
- Operation: Under MAS Capital Market Services Licence (CMS100604-1)
- Methodology: A proprietary investment strategy called the Economic Regime-based Asset Allocation (ERAA) which continually monitors economic and market cycles to rebalances accordingly
- User Interface: Adopting a modern interface similar to Betterment (USA) with simple goals, charts, and visuals
- Pricing: Between 0.8% ($10k) to 0.2% ($1M) of total invested per year (No Minimum to start)
- History: Started in 2015 by ex Investment Banker at government firm, Ow Tai Zhi and ex Management Consultant, Noel Lee
- Funding: Undisclosed but with high net worth angels and currently incubated in NUS Enterprise
- Operation: Under MAS Financial Advisor Licence (FA100064-1)
- Methodology: A rule-based investment approach and strategy which places a strong emphasis on diversification across major asset classes, geographical regions, and industries.
- User Interface: A heavier interface with bright visuals and more words to digest and numbers to understand
- Pricing: Flat 0.5% of total invested + USD18 platform fee per year (Minimum to start: S$3,000)
- History: Started in 2015 by ex Start-up professional, Keir Veskiväli and Investment Analyst, Artur Luhaäär
- Funding: Undisclosed but with high net worth angels and Expara Ventures
- Operation: Under a collaboration with VCG Partners Pte. Ltd. a MAS licensed fund manager in Singapore. Legally you’re contracting with the licensed fund manager, while Smartly is the technology provider. (i.e they don’t hold or invest your money directly)
- Methodology: Modern Portfolio Theory (MPT) consisting of ETFs that efficiently capture the global stock markets as well as give exposure to bonds and real estate. Rebalances when market conditions change.
- User Interface: Underwent an intensive design iteration from version 1.0 until now. Engaged external agency work to help redefine company branding with visuals and interface.
- Pricing: Between 1% ($10k) to 0.5% ($100k) of total invested per year (No Minimum to start)
Comparison of Yearly fees (Robo vs Banks)
The following numbers were calculated based on the above % fees and rates charged by the respective Robo-Advisors and traditional fund managers.
Investment amounts ranged from $10k to $50k. 🙂
|Amount Invested||Stash Away||Auto Wealth||Smartly||Funds|
Conclusion: Do your own due diligence via Robo-Advisors
As with any other investments out there, there are bound to be risks aplenty. However, this provides an easy way to get started passively. It is ultimately up to you as a retail investor to do your own due diligence especially regarding the ETFs (Exchange Traded Funds) they invest in before executing.
Use this article as an introduction into the world of Robo-Advisors in Singapore, and if we look at the trends in the USA with Wealthfront (led by an experienced management team) and Betterment (heavily funded and growing assets under management) we can see that ultimately the low-cost era is upon us and here to stay. Cheers!
If you have any questions, do head over to our SG personal finance community in Singapore where we debate about such issues, solutions and the future of personal finance. If you are a real beginner, this article may not be for you yet, check out the Seedly Personal Finance Cheat Sheet now!