Hong Kong-headquartered robo-advice systems provider, Quantifeed, is sounding out the NZ market after opening an Australian office this February.
Graeme Brant, Quantifeed head of strategic partnerships in Australasia, said the firm was initially pitching its business-to-business (B2B) robo-advice solution to KiwiSaver providers.
“Most KiwiSaver members need advice as their savings grow – it’s not just pick-and-forget,” Brant said. “While some KiwiSaver providers are already starting to offer members digital advice, others have recognised the need but are not sure how to go about it.”
He said Quantifeed had a proven B2B advice platform currently in use by a range of financial services firms in Hong Kong, Singapore, Taiwan and China. The group also has secured a couple of smaller clients in Australia, where the fall-out from the recent Royal Commission into financial services (RC) could spark new opportunities for robo-advice specialists.
With all Australian institutions ditching, or assessing, their current advice models and independent financial advisers (IFAs) facing tougher compliance hurdles (pricing their services beyond most ‘mass affluent’ clients), Brant said there was an expanding gap in the market.
“There’s a growing pool of people who need advice but there’s no-one there to service them,” he said.
Brant said technology can already deliver “end to end personalised” advice, although incumbent financial institutions rather than start-ups were likely to dominate in the space.
“Fintech robo-advice firms are finding out the hard way that the cost of customer acquisition is a long and painful road,” he said. “There are already plenty of carcasses on the way.”
However, while financial institutions had distribution and brand, many were looking externally for flexible robo-advice technology.
Quantifeed offers institutions a white-labeled technology platform that can include risk-based investing (matching risk profiles to portfolios) and/or a goals-based approach, where investments are tuned to individual targets such as education or retirement saving.
Institutions can back in to the robo-advice system whatever investments they deem suitable for their clients but Quantifeed also has a stable of in-house ‘thematic investing’ model portfolios, which Brant said could be attractive to self-directed investors or stock broking firms.
The group of about 50 model portfolios typically hold between eight to 20 stocks, funds and/or exchange-traded funds (ETFs), targeting emerging trends such as robotics and self-driving cars. Brant said the firm’s experienced team of quantitative analysts create the “transparent, rules-based” portfolios but clients manage execution and custody.
“For example, for brokers who specialise in local stocks, our thematic portfolios for them to offer clients an easy way to access global trends in a diversified way,” he said. “The NZ investing mindset is actually more open to investing globally than in Australia.”
The trading mentality also suits Quantifeed’s home clientbase in Asia, where the group has secured partnerships with about 10 institutions including its latest sign-on, the Singaporean DBS Bank.
DBS rolled out the Quantifieed-built ‘digiPortfolio’ system in February in a bid to expand its private banking investment solution to a wider client base.
The Taiwan-based Cathay United Bank also launched a robo-advice solution on Quantifeed technology late in 2018. Global investment firm, Legg Mason, took a stake in Quantifeed last year during a US$10 million funding round.
Former investment bankers, Alex Ypsilanti and Ross Milward launched Quantifeed in 2013.
Robo-advice has had a very limited take-up in NZ since the Financial Markets Authority (FMA) opened an exemption from the current law (which restricts personal financial advice to humans) early in 2018
Just two KiwiSaver providers – Kiwi Wealth and Nikko Asset Management – plus a life insurer, Cigna, and a small financial advisory operation, National Capital, have launched limited robo-advice products under the FMA exemption.
According the FMA, another two robo-advice exemption applications are in the pipeline with more expected.
However, many providers, including BNZ which has just launched its KiwiSaver ‘Wake Up’ tool, offer calculators that skirt the borders of personal advice.
Most NZ businesses intending to offer robo-advice services are likely awaiting the formal start of the Financial Services Legislation Amendment Act (FSLAA) regime next year. Robo-advisers will operate under the same licensing rules as all advice firms in the FSLAA era.
