Hong Kong-based online trading firm 8 Securities has launched a system that constructs a portfolio of exchange-traded funds for customers based on their answers to a series of questions.
Mathias Helleu, executive chairman and co-founder, said ‘8 Now’ was the first such service to be launched in Asia.
Based on how they answer certain questions, an individual’s investment time horizon and risk tolerance is assessed and they are given a portfolio of ETFs chosen by fund research house Morningstar.
While the ETFs themselves are passive products, the portfolios are automatically rebalanced based on customers’ risk preferences.
Helleu said the attractions of such online services included cheaper fees than are charged by traditional wealth management providers, and a lower entry point; 8 Now’s minimum investment is $10,000.
Betterment, a similar service in the US, sets annual fees starting at an 0.15% annual fee of a customer’s total portfolio value.
The amount of money managed by automated services is projected to exceed $255 billion globally within five years, according to a report last September by MyPrivateBanking Research. The report had forecast the figure would reach $14 billion by the end of last year.
Helleu said the rise of a younger generation in Asia taking charge of family wealth would inevitably lead to the rise of assets managed online.
“Financial institutions have not evolved to meet the new demands of this next generation of investors,” said Mikaal Abdulla, 8 Securities’ chief executive and co-founder. “That’s the role we and other ‘digital financial’ service providers hope to fill.”
The service is to be offered to customers in Hong Kong and Japan, where 8 Securities has offices and a total of 50 staff, but Helleu said there were no plans to expand elsewhere in Asia this year.
Before establishing 8 Securities nearly three years ago, Helleu was managing director of online brokerage E-Trade’s international business. That firm had led a “revolution” in brokerage, said Helleu, who was confident that automated asset services would achieve the same result.
“Technology has been disruptive, but at the end of the day wherever technology has disrupted it has created improvements for the customer,” he noted. “This product is an opportunity for the wealth industry, not a challenge. When everyone has access to the products at low cost, it will translate into a much better situation for customers.”
Certainly, fund managers, banks and research houses have all pointed to the growing potential of electronic sales of funds and their potential for shaking up traditional distribution models. And the runaway success of Chinese money-market fund Yu'E Bao last year is a clear example of this in action.