Would you ever take investment advise from an app?
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Fintech firm 8 Securities said on Monday it plans to launch Hong Kong’s first so-called robo-investment advisor app in the next quarter, which it is calling “Chloe”, but experts remained divided on whether such an idea will every catch on in the city.
Asia, and especially Hong Kong, is seen as lagging other international markets on the adoption of robo-advisors.
Assets held by such robo-advisors in Hong Kong are expected to expand exponentially to US$20.6 billion by 2020 from the current US$400 million, according to a Boston-based research firm Aite Group’s latest robo-advisor forecast.
The apps are powered by artificial intelligence and machine-learning technologies developed in-house, and effectively learn day by day as a system’s user base and database grows, matching products to customers with different financial needs.
That’s very different, of course, to what is offered by around 450 local brokers in Hong Kong, who have traded for decades, by offering personalised services based on close relationships, to hold onto clients.
Mathias Helleu, 8 Securities’ executive chairman and co-founder, expects the Chloe app’s popularity to grow fast thanks to higher mobile penetration and lower entrance levels for users.
“Chloe users will have the freedom to deposit or withdraw money from their portfolio anytime and with no penalty,” said Helleu. “The minimum investment amount with Chloe will be under HK$1,000.”
In the West, the fledging robo-advisor industry is growing fast.
By the end of 2015, US robo-advisor services had US$53 billion in assets under management, up from US$2 billion in 2013, according to statistics from the Aite Group. Key players include both startups such as FutureAdvisor, Bettermont and WealthFront, and big industry names, such as Bank of America Merrill Lynch.
I do not expect robo-advisor apps to prove attractive in mature markets like Hong Kong. Here, retail investors consider their brokers or wealth managers more reliable
Benny Mau, chairman of Hong Kong Securities Association
“Chloe users will have the freedom to deposit or withdraw money from their portfolio anytime and with no penalty,”
However, that number of managed assets is still small compared with the US$20 trillion total investable assets by US retail investors.
Traditional Hong Kong brokers, however, questioned on Monday whether local retail investors, many of whom still like going to bank branches or brokers shops to buy and discuss their investments, will ever use such an app.
Benny Mau, chairman of Hong Kong Securities Association, the industry body, said: “I do not expect robo-advisor apps to prove attractive in mature markets like Hong Kong. Here, retail investors consider their brokers or wealth managers more reliable [than robo-advisors].”
Mau also added Hong Kong investors are more rational than in other developing markets and a lot more cautious and selective as to which investment services they use.
However, he did concede some young investors could find the service appealing.
But Brett McGonegal, chief executive of Capital Link International, said robo-advisors are sweeping the investment world as they represent the pioneering wave of the fintech revolution.
“This is critical in addressing the needs of a new investing group around the world — that’s millennials. “Platforms that blend human contact with technology will prove to be very successful amongst the new generation that often feel more comfortable communicating over electronic means rather than face to face,” McGonegal said.
Jenny Lau, a recent graduate whose basic monthly salary is HK$21,000, said she would try her hand at Chloe because it has no penalty and is convenient to operate on her mobile phone.
“The minimum investment of under HK$1,000 is no big deal for me,” she added.
“But it will just be to satisfy my curiosity and I do not expect any high investment returns. I’ll not use it for my life saving goals.”
Questions & Answers
Q.What is 8 Securities' new app called and what makes it distinct from traditional services?
What is 8 Securities' new app called and what makes it distinct from traditional services?
The app is called Chloe and is Hong Kong's first robo-investment advisor. It uses AI and machine-learning to match products, unlike the personalised, relationship-based services offered by traditional local brokers.
Q.What is the projected growth for robo-advisor assets in Hong Kong?
What is the projected growth for robo-advisor assets in Hong Kong?
Assets held by robo-advisors in Hong Kong are expected to grow from US$400 million to US$20.6 billion by 2020. This indicates a significant expansion in the adoption of such services in the region.
Q.What are some of the benefits of using the Chloe app, according to 8 Securities?
What are some of the benefits of using the Chloe app, according to 8 Securities?
Chloe users can deposit or withdraw money from their portfolio anytime without penalty. The minimum investment amount will also be under HK$1,000, making it accessible to more users.
Q.Why do some industry experts doubt the appeal of robo-advisors in Hong Kong?
Why do some industry experts doubt the appeal of robo-advisors in Hong Kong?
Some experts believe Hong Kong retail investors prefer personal relationships with brokers or wealth managers. They also see Hong Kong as a mature market where investors are cautious and selective about investment services.
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