This publication recently spoke to the digital advisor business about prospects and what it thinks of the potential for further "robo" wealth growth.

Singapore-based robo-advisor Bambu, which targets mass-affluent clients, has more than 100,000 customers and wants to onboard 1 million customers over the next two years, its chief executive and founder says.

There is a segment of the wealth management which comes under the HNW category but above the retail segment, and this cohort contains the HNW clients of the future. Nurturing it and serving it makes plenty of sense over the medium term. 

In December last year Bambu, Apex Clearing and US asset management titan Franklin Templeton collaborated to bring out Tango, a turnkey robo-advisor that gives advisors the ability to provide personalised, goals-based wealth management at scale.

“The end-customer will get a digital wealth journey to build and invest in their own financial goals. The platform is targeted at consumers with $50,000 to $200,000 in assets under management and who are best served with digital,” Ned Philips told this news service recently. 

The digital wealth space – definitions can vary – is already large and growing. A number of commentaries say that, globally, the digital market will manage trillions of dollars in assets in coming years. One report from last year (Daily Fintech, 16 June) said that total AuM was just under $1.0 trillion and could reach $2.4 trillion in under five years from now, given a compound annual growth rate of 26 per cent).

Digital platforms have often targeted the mass-affluent rather than the HNW and ultra-HNW end of the spectrum, although the lines blur. A report by Boston Consulting Group issued last year said that the mass-affluent market should be tapped as a new source of growth. In Asia, Ant Fortune, part of Ant Financial, has taken aim at this space; in the US, Betterment and Wealthfront are important players. Another example from Singapore is StashAway, which this publication interviewed recently. 

Robo-advisors have their critics. In 2017, Mark Carney, governor of the Bank of England at the time, voiced his concern that these platforms, using algorithms to buy or sell assets based on pre-set risk tolerances, could actually encourage “herding” behaviour in markets, leading to dangerous one-way bets in the market. 

The field is still relatively young, as noted in an academic paper for the University of Maryland University College (13 February 2020). The author argued that the term “robo-advisor” is misleading. “The algorithm doesn’t advise an investor it is merely a financial instrument, a tool, a function, that is fed with inputs, in this instance the client’s answer to a questionnaire, therefore, investors should be given the option to exercise their own due diligence by manually accepting the recommendations offered by the algorithm and not automatically invest the client’s assets.”
 

International ambitions
Although based in Singapore, Philips’s goals are international, and he has US wealth management in mind. 

“Our focus is on RIAs who want to go digital and serve their up-and-coming client base. This is a great way to fuel growth with customers while also saving time and effort,” he said.  

At present, Bambu is running online campaigns, providing educational content and conducting outreach marketing strategies to build visibility for this brand, with about 20 wealth management firms using this platform. Ultimately, about 300,000 end-users will be involved.

Franklin Templeton, which is an investor in Bambu - founded in 2016 - has drawn VC funding from Wavemaker Partners, part of the Draper Venture Network. It has also attracted funding in a Series B round from Chicago-based PEAK6 Strategic Capital LLC.

Besides Singapore, the firm has offices London, Hong Kong and representatives in San Francisco, and Johannesburg, with clients in the US, Europe, the UAE and across Asia.

With Tango, Franklin Templeton provides the goals-based portfolio management advice to advisors through its proprietary Goals Optimization Engine. Bambu's white-label platform is the digital solution for clients and advisors, while Apex facilitates trading and custody through its modern back-end platform built for safety, scale and speed. 

Asked if the robo phenomenon has been overhyped at times, Philips said that the offering competes against the likes of Betterment; these are still early days for the robo trend and there is big potential in the market.  

“I would challenge the idea that the robo story is overdone or incredibly competitive. The percentage of people using digital wealth is still in single-digit percentages,” Philips said. 

“In 2016, 2017 and later, people were doing robo advisory more to experiment. With banks, they have relied on a high-fee, personal experience offering. In the last 18 months the movement to digital wealth has accelerated,” he added.