Asset & Wealth Management
Asia’s most exciting founders of B2C robo-advisors
Direct-to-consumer robos are coming into their own within Asia’s wealthtech industry: here are the pioneers.
Michele Ferrario, StashAway
It was a given that the only sustainable path for a robo-advisor in Asia was B2B, because the cost of customer acquisition for retail was too high.
Singapore-based StashAway has revealed this to be a myth, having reached $1 billion in assets under management in late 2020.
“We began fund-raising [from venture investors] more than four years ago,” said co-founder and CEO Michele Ferrario. “Ninety-nine percent of investors thought B2C wouldn’t work, because it didn’t work in the U.S. In Asia they thought it would be impossible to make the unit economics work.”
StashAway went ahead anyway, on the intuition that the customer-acquisition-cost of the U.S. didn’t reflect the situation in Asia. In the U.S., incumbent brokers such as Charles Schwab could repeat the experience of building a digital, diversified portfolio and charge low fees.
But discount brokers don’t operate in Singapore: fund distribution is dominated by banks, which charge a management fee and front-end loads of 5 percent or more, usually to justify pushing customers towards structured products or investment-linked insurance products.
The value proposition of a robo-advisor in Asia versus a bank is a huge difference compared to what a U.S. robo can offer vis-à-vis other distributors. Ferrario would not disclose StashAway’s customer acquisition costs but says it’s a fraction of what robos face in America.
On top of the business model, the firm has executed by adding artificial intelligence (built by CTO and co-founder Freddie Lim) to portfolios to generate returns that beat benchmarks. Those results add up in a service that preaches compound interest over trading. StashAway has also focused on customer service, with the aim of giving small investors the kind of attention banks usually reserve just for their wealthiest clients.
“It’s about the mindset. Banks don’t do digital. They do wealth,” Ferrario said. Now about 20 percent of StashAway’s AUM comes from high-net-worth individuals, not just the mass affluent.
StashAway has recently opened businesses in Malaysia and Dubai, with more to come this year.
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