Taiwan’s markets watchdog last week relaxed a key restriction on robo advisers – an industry that local industry analysts are tipping for big growth – as it seeks to drive take-up of financial technology.
The Financial Supervisory Commission (FSC) said it would allow robo advisers to automatically rebalance a client’s portfolio if the investment return of a particular underlying or the overall portfolio were to deviate from the chosen benchmark, as long as they have an agreement with clients that they can do so. Clients must be informed of the changes immediately after the rebalancing.
The first set of rules for robo advisers, issued on June 26, had required providers to seek client approval to rebalance portfolios.
Robo advisers have big potential as they represent a new, cheaper channel for investment advice, said Donna Chen, founder and president of Taipei-based market research house Keystone Intelligence. Retail investors in Taiwan have tended to rely on bank consultants to help them make investment decisions, she told AsianInvestor.
Robo advisers use algorithms to build portfolios using funds that broadly meet the risk appetite of each investor. These low-fee platforms target investors relatively comfortable with technology and with some wealth, but who don’t qualify for private banking or similar advice.
Chen said banks, asset managers and investment consultancies were keen to get into the robo-advisory business in Taiwan. It will be of interest to foreign fund managers with an established presence the ability to sell direct to retail investors in Taiwan, she noted; less so those that focus on wholesale business.
Local firms already have offerings in place, and overseas players are also making moves.
Taipei-headquartered O-Bank launched its robo-advisory service on July 10 and has attracted some 600 registered users and NT$14 million ($462,000) of assets under management so far, FSC said. All its underlying assets are invested in mutual funds.
Local investment advisory firm Tarobo has obtained a licence to offer robo services, while domestic rival SoftBi – along with UBS and Nomura Asset Management – have put in applications.
FundRich Securities, Taiwan’s government-backed online fund sales platform, plans to launch a channel for third-party robo services early next year, chairman Sherman Lin told AsianInvestor.
Meanwhile, CTBC Bank, Taiwan's biggest wealth manager by fee income, plans to launch a robo-advisory offering this year, taking the view that third-party technology vendors do not offer sufficiently long-term commitment or allocation strategies.
CTBC is seeking approval to use robo technology within a trust structure, so it will be more like a discretionary investment management tool than a pure robo-advisory business, a FSC spokesperson said.