Why robo advisory will struggle to take off in Asia

For months now, robo advisory has been the talk of the investment town. Will machine win against man and make relationship managers obsolete? Or will it purely play an augmenting role – helping RMs serve their clients better?

For Martin Young, CEO at Farringdon Asset Management, there’s a more fundamental issue at hand.

‘The question for robo advisory in Asia is how it's going to be rolled out because there are certain unique challenges in the region,’ he told Citywire Asia.

‘Robos work well in a market like the US -- where you have access to 30,000 to 50,000 investment solutions. In Asia, there isn’t any market that has more than a couple of hundred solutions.

‘When a person goes to a robo advisor, they want it to give them selected benchmarks of investment which are going to meet their risk profile, tolerance levels, their return expectations etc. The current asset management industry is incapable of providing that for the investor because there aren’t enough products to choose from.

'It's a challenge for robo advisors to work properly purely because the markets are too small,’ he said.

Despite the hurdles, the Singapore-based external asset manager is looking to tap the robo advisory market with the help of technology from Leonteq.

‘At the moment, we are looking at leveraging off of Leonteq’s various products and solutions to produce content towards the robo advice market,’ Young said.

Leonteq is a Zurich-headquartered technology and service provider for investment solutions that is set to provide robo advisory and data aggregation technology to its clients, including private banks and IAMs, in Asia for free, according to Young.

Farringdon AM is part of Kuala Lumpur-headquartered Farringdon Group.

‘In my opinion, none of the Asian markets, aside from China and Japan, are capable of launching a robo advisor. The content is not there.

‘There will be a challenge in every individual country to set up the infrastructure and content for robo advisory,' Young said.

The firm is looking to use Leonteq’s technology to draw up smart beta strategies as well as others that capture the flavour of the moment, such as fintech investments.

Farringdon Group, a provider of private wealth management and personal tax planning solutions, was established in 2007. The group manages $175 million in assets for clients across Asia Pacific, Russia and Central Asia.

Source from citywireasia.com

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