As of 2020, Singapore's robo-advisors are estimated to have assets under management of around S $ 1.5 billion, distributed among around 105,000 users.
This is just a fraction of the Singapore $ 3.4 trillion wealth management industry. However, growth is particularly promising, especially among the younger generation.
However, it has been said that robotic consultants lack the human element and are unable to provide truly bespoke and holistic financial planning services to their clients.
Does this mean that robo-advisors are seen as an asset for the investment industry? Does it have a place in the world of serious investing or can it just be used as a supplement?
In this article, we discuss the outlook for robo-advisors in the industry and whether they can really replace financial planners.
What can robo-advisors do?
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Robo-advisors are digital platforms that provide automated, algorithmically driven financial planning services.
It collects information from customers about their financial situation and future goals through an online survey and then uses that data to provide advice and automatically invest customer assets.
Depending on the type of portfolio you are in, robo-advisors can react instantly to changes in the market.
This is a more efficient method than a financial advisor, which you would have to meet physically to discuss your portfolio and adjust it to your goals, which can change from time to time.
The increasing growth of robo-counseling has raised the question of whether human counselors are potentially critically endangered.
Additionally, with modern technology, face-to-face transactions are becoming less recommended due to the Covid-19 pandemic leading to robo-advisors.
It has also been said that robo-advisors are cheaper than traditional advisors.
Typically, financial advisors will charge between 2 and 3 percent (or more) of the value of your portfolio, while robo-advisors will typically charge less than 1 percent.
However, their low upfront prices are accompanied by a loss of quality.
Robo-advisors lack an irreplaceable human element that prevents them from delivering the essential qualities and services that are characteristic of traditional financial advisors.
Unlike robo-advisors, a financial advisor can show empathy that you may need when dealing with money matters.
The rise of the robo-advisors in S’pore
Robo Advisory has rapidly gained popularity over the past decade, with ETFs underperforming and commodity prices falling.
Today there are more than 10 robo advisor platforms in Singapore.
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Large mutual funds are implementing robo-advisory technology as the efficiency of automated portfolio management promises high returns compared to old-fashioned alternatives.
As a result, companies offering the same technology are becoming increasingly popular.
For example, the MAS licensed Digital Wealth Manager Syfe can create personalized, professionally managed portfolios in minutes using its mobile and web applications.
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Syfe's investment advisors promise an intuitive investment experience that is inexpensive and hassle-free.
Another popular player in the industry is StashAway, which is also MAS licensed.
Before Syfe hit the market, the robo-advisory market in Singapore was dominated by three players – AutoWealth, Stashaway and the now defunct Smartly, sometimes abbreviated to “ASS”.
The intelligently quoted intense competition in the field of digital investment advice is intense and maintaining a high standard of service on the platform is a challenge for maintaining business.
You can have a place for beginner investment
Robo-advisors have their place for beginners who are just starting out or for millennials who are more tech-savvy.
Due to its low cost, Robo Advisory appeals to students or recent graduates who do not have a lot of capital but want to start investing earlier.
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Robo-advisors help fill a niche in the market by offering low-cost, diversified investments with automatic compensation and tax loss harvesting to investors who need to manage S $ 1,000-10,000.
However, as the investment increases and the portfolios become more complex, human financial planners need to intervene.
As mentioned earlier, at some point robo advisor technology will still need human intervention.
If you are a passive investor, a robo-advisor may be all you need. Meetups with financial advisors to review your financial health and investments, physical or virtual, can be too time consuming if you're not as committed.
Hence, a robo-advisor who automatically rebalances or readjusts your portfolio is for you.
However, if you are a more active and serious investor, a financial advisor may be a better choice as they should be able to answer your questions and provide context.
Singaporeans still need to seek professional advice when investing their money in complex financial products such as life and non-life insurance, mortgages and investments.
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