Why Digital Investment Managers are Attracting A New Class of Investors
5 June, 2019
Wong Wai Ken,
Country Manager - Malaysia, Stashaway
It is no secret that Malaysians hold too much cash and are not investing enough. Cumulatively, Malaysian individuals hold RM682 billion in cash deposits, representing 43% of their gross financial assets. This is high compared to 36% cash holdings for Singaporeans and 14% cash holdings for Americans, signalling that the local investment services industry needs to evolve to offer lower-cost options and access to investment products that were not previously available. As these options increase, so will the demand for the wealth management industry to be more intelligent, low-cost, convenient and transparent.
As more Digital Investment Managers continue to be awarded licenses by the Securities Commission (“SC”) we will see confidence in the investing public grow. We foresee investors being more wary of potential financial scams, and look to regulated operators to invest their money.
We are encouraged by how enthusiastic Malaysians are responding to our services, after entering Malaysia in November 2018 from Singapore. Our platform offers sophisticated, institutional level investing to both retail and accredited investors. The portfolios are personalised and we pair the sophistication with a flexible experience that includes, no minimum balance, no lock-ups, low fees, and flexible deposit schedules.
In the past, options to access globally diversified portfolios at a low-cost and no minimum investment were non-existent. One either had to invest via a unit trust provider who had high entry and annual fees or invest directly via an international broker, both of which came with high sales charges, high foreign-exchange conversion fees and high minimum investment. Many local banks focus on distributing unit trusts as a form of cross selling or to receive commissions, while lower margin products like ETFs do not get much focus.
Using technology, Digital Investment Managers are able to operate with much lower costs and pass on the benefits to investors. Without an agency or branch network, distribution costs can be eliminated altogether which is then able to be enjoyed by the investor, in the form of no sales, switching or exit charges. This means that all of the investor’s money is put to work, and the compounding of these gains become meaningful to the investor in the long term.
Furthermore, by offering fractional ownership of low-cost Exchange Traded Funds, Digital Investment Managers are able to offer investors the ability to invest with low or no minimum investment. This makes it affordable for those that have just entered the workforce or are new to investing.
Over the past decade, much has been said and done about financial inclusion from a social aspect. For example, we have financial literacy and government programs to insure Malaysians in the B40 segment. As Digital Investment Managers, we believe we are part of the overall solution to democratise investing by offering services to the retail market that empowers them to save and invest in a much more convenient way.
The views expressed in this article are those of the author alone and not the organisers of MyFintech Week 2019