The world is seeing technology-led disruptions across the globe at a pace that is unprecedented. From payment banks to digital wallets and peer-to-peer lending, the traditional and often conservative world of finance is being turned on its head. These changes are manifesting not just in the developed economies (United States and Europe) but also in fast-growing markets like India and China.
One of the latest innovations in Fintech is the emergence of robo advisors!
What is a Robo Advisor?
A robo advisor is a self-service investment platform that users can access through their smartphones. Not only financial advisors but smart algorithms can now advise you about which investments you should make. This automates portfolio management and reduces costs drastically.
Robo advisors started in a rudimentary way close to a decade ago in the United States with investment companies like Betterment and Wealthfront leading the way. In the past few years, robo advisors arrived in the United Kingdom and the Western Europe too amid an onslaught of Fintech disruptions.
However, it is only recently that Asia has also woken up to this massive potential of robo advisors be it in Singapore, China, India or Korea.
Why are Robo Advisors on the Rise in Asia?
Asia is one of the fastest growing regions in the world with high amount of disposable income in the hands of people. There is great upward mobility and many people are now becoming a part of the middle class, the mass affluent or the HNIs (High Net worth Individuals).
Assets under management in Asia have grown at a fantastic annual rate of 18% in the last 5 years to reach an estimated $15 trillion in 2018. And this growth rate will continue to hold steady over the next few years.
This makes Asia one of the most exciting markets for financial advisory firms.
Added to this general buoyancy is the general consensus that many people in Gen X mistrust financial advisory professionals, having been through two major recessions. Combined with this is the “digital-first” approach of the millennials. A survey by Bain & Company shows that a whopping 75% of millennials are willing to buy a financial product from a tech company.
All these factors together mean that there is a huge market for robo advisors in Asia, and Fintech startups and traditional investment companies are both geared up to take advantage.
Despite the promise they show, robo advisors are still at a very nascent stage in Asia. Although incomes are rising and people are upwardly mobile, most of Asia remains highly value conscious. Large scale adoption of robo advisors will depend on how much cost reduction they can really bring about and if they can manage to lower the minimum investment amounts required. Security and safety of the transactions will be another major factor in the sustained growth of robo advisors in Asia.
Although growth may be a little slower than expected, due to the various complexities in the Asian market, there is no doubt that robo advisors have massive potential in Asia which will only increase with time.