Singapore broker CGS-CIMB has launched a wealthtech business in order to win a new generation of younger customers – and diversify its transaction revenues into a business based on accumulating assets.
Saw Ping Mei, the firm’s group head of strategy and analytics, is now also founder of ProsperUs, a digital investment service.
“Our client base is people over the age of 40,” she told DigFin. “We realized that was our opportunity.”
CGS-CIMB International Securities is a 50-50 joint venture between China Galaxy International Financial Holdings (a unit of China Galaxy Securities) and CIMB Group. Malaysia-based CIMB itself has grown via acquisition, notably by absorbing Royal Bank of Scotland’s Asia equities business in the wake of the 2008-09 global financial crisis.
Today the brokerage venture claims the largest market share among domestic brokers in Singapore equities, and is also active in Indonesia, Malaysia and Thailand.
Diversifying clientele
But the business is heavily skewed to domestic equities in those markets, often dealing in leveraged trading for its local clients. Meanwhile, it saw the rise of digital offerings: from fintechs and wealthtech startups, to electronic brokerages, to banks launching their own robo-advisory services.
“There are new entrants such as commission-free trading apps, and we needed a way to remain relevant,” Saw said. “We also wanted to create a business that focused on building wealth.”
ProsperUs was developed specifically for millennials and Gen-Z users. To attract them it has been designed to be multi-asset and international, offering securities, mutual funds, exchange-traded funds, forex, and leveraged products.
“We have traditional banking roots and we want to diversify from core equities,” Saw said. “That means building relationships for the long term, and not just based on transactions.”
Although existing brokerage customers are welcome to use ProsperUs, its customer acquisition strategy is focused on finding new users.
Carol Fong, group CEO at CGS-CIMB, said, “While there is a wealth of experience in established houses, its form as it stands today may not be optimal for younger investors.”
New revenue streams
ProsperUs can also generate different kinds of revenues. Its leveraged products can generate interest-rate income, while the firm can charge fund managers retrocession fees to distribute their mutual funds.
But the idea is to generate revenues off the back of growing assets under management. “We want to grow with our customers,” she said.
Cost of acquisition can be high, and Saw did not specify an AUM target, but she says the firm’s goal is to onboard 10,000 users in the next 12 months – making engagement and funding rates her key metrics.
Asian retail investors have a reputation for being trading-oriented rather than keen on longer-term investing in funds, at least compared to people in the West. But Saw’s research suggests this may not be the case for younger people, who may have fewer assets and a better awareness of investing.
She notes that in both Singapore and Indonesia, new mutual-fund accounts are growing more quickly than new brokerage accounts. “And even active traders hold a percentage of their wealth in long-term investments,” she added.
