Robo-advisory 1.0 introduced the world to the notion of using mobile inputs to suggest portfolios of simple investment exposures based on how an algorithm calculated the user’s risk profile. The first ones, launched in the late 2010s, invested into ultra-low-cost exchange-traded funds; later iterations curated actively managed funds into the mix.
These earliest models were aimed directly at users, providing individuals with a cheap version of the analytics previous reserved for institutional investors.
Even so, the business model struggled with high customer-acquisition costs and a ceiling on early adopters. The model evolved into robo 2.0 by partnering with banks or financial advisors, instead of competing with them, and adding tools for relationship managers to provide financial planning ideas. This model was validated in 2015 when BlackRock acquired FutureAdvisor.
Since then, banks and other distributors have tried to partner with fintechs to get more information about their clients – the earliest businesses were screen-scrapers trying to check out customer accounts at rival firms. These weren’t notably successful.
More sophisticated versions of B2B robo 2.0 made better use of artificial intelligence, of the machine learning and neural-network varieties. This enabled a degree of personalization, understanding of investor behavior, and more sophisticated ideas of user risk appetite. Robos and wealth managers have also been experimenting with automated processing and augmented or mixed-reality experiences.
And players remaining in the B2C space adopted the same tools.
The next iteration
While no one is about to go ‘full robo’ and unleash automated investment picks, we may be at ‘robo 3.0’, which is the extension of wealthtech into the last customer segment that has been mostly off limits: the ultra rich.
Large global and regional banks jealously guard their private-banking customers by offering them very high-touch business. The business is not designed to scale operationally but to cater to vast asset pools. Tycoons and their kids may of course be now using digital tools, but these have mostly been bank-provided apps.
These rich families stick with private banks for reasons of trust and safety, but it’s also for the non-investment value-adds. There are now wealthtechs that can provide the full suite of investments at a fraction of the cost, including access to private equity and hedge funds. Rich people might dabble with these fintechs but they don’t bank with them.
Moreover these fintechs have stayed lean and low-cost by sticking to the investment side, which is just spreadsheets and readily automated.
Private banks catering to the very rich offer them generational planning, philanthropy services, legal and trust services, access to loans, and services for the businesses the families own (investment and transaction banking, etc).
Enter Arta
This is the space that the next generation of robo-advisors has begun to chip away at. Arta Finance, based in the US but now with its first international office opened in Singapore, has launched a service layer providing philanthropy services.
Other robos have already introduced investment services aimed at the richest people, such as StashAway Reserve and Endowus Private Wealth.
But that’s still about the investment side of wealth management. Arta is diversifying the business model into high-touch services. This is on top of an array of investment products: core ETFs and funds, structured products, and access to private assets.
It’s using large-language models to provide the interface with customers, be they B2C or bank partners, says Amanda Ong, Arta’s Singapore country director and head of its international expansion. “This is ‘wealth-as-a-service’,” she said.
Ong joined last year from Prudential Wealth Management, having also worked at robo competitor StashAway and at Citi serving institutional investors.
Singapore start
Arta launched only last autumn in the US as a B2C wealthtech. It opened in Singapore in mid-October with a license from MAS, the regulator, with a mission to win accredited-only investors and enter the B2B space.
“We compare ourselves to a private bank,” Ong said. The business is targeting people with a net worth of up to $250 million. “We’re the only robo-advisor targeting the ultra-wealthy.”
In October 2023, the US business said it had amassed $100 million of assets under management. The firm would not disclose updated figures.
Arta is ambitious, doing everything: direct retail and high-net-worth, wanting to also partner with banks, ETFs, mutual funds, structuring, and platforming private funds. Other robos tend to focus on part of this offering; the business looks complex to run – like a bank built on data and AI. But there’s more plates to spin.
The startup comes with heavy-duty backers, though. In the US, its cap table includes Peak XV, Ribbit Capital, Coatue, and 140 ‘angel investors’, deep-pocketed individuals such as Eric Schmidt, the former CEO of Google, and Michael Miebach, the CEO of Mastercard. Arta has already raised $90 million in seed and Series A funding.
That level of support now extends to Singapore. The B2B business here was incubated by the government via its Economic Development Board. Temasek, the government investment holding company, is a strategic partner via Co-Axis, a project run by Temasek Trust, which provides access to philanthropy programs.
The startup calls the Co-Axis arrangement part of its ‘expert services’. Arta leverages other businesses with niche specializations to package for its own users. For example, it also selects private equity funds from iCapital’s platform.
Google Cloud, Wio Invest (out of Abu Dhabi) and consultancy CapCo are partners of the Singapore business. Wio says it will integrate Arta’s ‘wealth as a service’ platform into its own investment app for its clients in the Middle East.
Private bank pivots
Ong says Arta is looking to partner with banks as well as compete with them. For now it can go head-to-head with regional private banks; it’s not ready to offer a UBS-like suite. Ong says more ‘expert services’ are on the way: “We want to go deeper. This is not just about making introductions to providers.” Arta’s edge is that it can provide all of these services to wealthy individuals or family offices at a fraction of the cost of a traditional private bank – and with the speed that digitization allows, such as a rapid onboarding process.
At the same time, it wants to develop a B2B business for banks that don’t have a mature private-bank offering. Ong says the Singapore business has won its first bank client, but she declined to name it.
On top of the list of services is Arta’s use of generative AI, with a copilot designed to help customers select securities based on stated preferences. Arta also has human advisors available, but clients can stick with an automated process if they prefer.
The copilots also interact with customers to provide reports. They can be tweaked to sound the way a customer wants to hear them: as a casual chat, or a formal, “Wall Street Journal style”.
The genAI is also meant to imitate the private-banking touch. Instead of admitting clients into a fancy office with espresso machines, Arta gives clients vouchers for coffee they can purchase in Singapore shops and redeem by uploading the receipt to the Arta app. The idea is that using the app turns the city into a giant bank atrium. The app also has community features, so one rich person can perhaps hang out with another rich person in an expensive café on Orchard Road.
Ong says it’s the copilot that is Arta’s selling point to potential bank clients. “They realize it would take them too long to build this on their own,” she says.
