Singapore Fintech Festival 2022: Saxo launches digital wealth advisory solution

This one-stop digital advisory solution will empower wealth managers to provide self-directed, advisory, and discretionary services and resolve operational, productivity, business, and relational challenges.

Despite wealth management services being spread across five sources - banks, brokers, independent financial advisors, external asset managers and robo advisors - challenges continue to permeate. Wealth managers are in dire need of digital tools that can support their business model scale, adhere to regulatory requirements, maintain their technology stack, and ensure surrounding services are well integrated.

Chang highlighted that after 30 years in business, Saxo continue to be focused on getting curious people invested in the world so everyone can have access to the entire market.” Saxo have single feature solutions as part of their offering, but this is the first time they have launched a single, comprehensive solution to augment the wealth management industry as a whole.

Reynolds added that while Saxo’s business is strong in Singapore, expansion into the independent financial advisor market would be a huge opportunity as they would support advisors scale beyond 20-30 clients to 80-100 clients - ”so that each individual can cover more clients with less effort.”

He continued: ”I think it's a particularly interesting time for advisors because the market is down so much in both equities and in bonds, that the classic portfolio theory of diversifying between high risk asset equities and the low risk asset bonds hasn't worked. And it's the first time it hasn't worked in a year so spectacularly like this where both your portfolio of long dated bonds and a portfolio of stocks are down 20+%.

“Clients really do suffer when they're seeing those sorts of drawdowns, especially in an inflationary environment like we have now, because it means that the value of your portfolio has dropped to 30%. In real terms, that's a substantial drop, especially if retirement is sometime in the next 10 years. As an advisor, being able to deal with the nervousness is a big part of what you must do in this sort of environment,” Reynolds explained.

Of course, this plays out differently from market to market and is dependent on regulation. In Australia, for instance, strong consumer protection regulation prevents wealth managers from taking any sort of trailing commission from insurance or all fund type products. As they can only make their money through charging clients, there has been a huge attrition in the industry and as a result, there are not enough financial advisors for the number of people that need them in Australia.

In Singapore, financial advice regulation has not kept pace with that in Australia or Europe. Advisors make most of their income from trailing commissions, whether that is insurance-linked or from fund-type products. Reynolds explored how this means that wealth advisory is a good business to be in, but this may not result in the best outcome for clients.

“If the advisor is driven by a profit motive and try to optimise their own earnings over optimising returns for their clients, that is something which I think that regulation needs to take care of. There are quite a lot of challenges to the industry, but I think that digital wealth space deals with that in a much better and more efficient way. Typically, digital wealth has a very transparent fee structure around it.”

Chang added that wealth management is a very personal service that impacts many aspects of an individual's or a family’s life and future. Understandably, that becomes a complex conversation with an advisor and trust in a large proportion is required for a successful relationship. Gone are the days where multiple face to face meetings and information printed out on PDFs are sufficient; behaviour has changed.

“Whilst we still want to meet a trusted advisor or manager and have the comfort that they are looking after my portfolio’s interests, my interests and my family's interest, I think with the advent of technology, in general, means that I expect something different now. I don't expect something that comes in the form of a fax machine printout or a PDF anymore. People expect things on mobile, transparency in the form of being able to access my portfolio at any point in time. That is something that we've seen a lot in every aspect of our life and is certainly not unique to financial advisory or wealth management,” Chang said.

Financial advisory tools now must be augmented to ensure that communication is transparent. However, regulation can occasionally be a hindrance to current providers that also may not have a drive to build technology that is comprehensive across more than two or three asset classes, forcing wealth managers to use multiple providers in order to facilitate what the client wants. SaxoPartnerConnect resolves this issue.

But how do advisory companies that do not have the IT budgets to run their own in-house Portfolio Management System and consolidated client front end choose a technology provider? Safety of assets is the number one priority, but also having a unified platform where client funds can be managed across different asset classes.

The strategic capture, organisation and interpretation of data will increasingly be the great differentiator in wealth, as with all digital services. A handle on data will also be imperative for businesses wishing to take advantage of the nascent possibilities that AI and machine-learning present to the wealth sector. Scalable personalisation, algorithmic decision making and - maybe one day - fully automated financial planning will be the exclusive preserve of data-lead organisations.

Reynolds stated that they view data in two different ways: data that helps to make investment decisions or protect portfolios, and data that supports the management of business. Further to this, helping the advisor identify portfolios may have require different types of AI. The entire Asian market is responding well to technology trends if it results in enhanced customer experience, but when considering uptake across ESG, the risk and reward is prioritised.

In Chang’s view, “I still see ESG as at an early stage and there will be a minor role to play and that can only grow because as people are more aware of what ESG means and the refinement of the ESG standards. I think that the adoption rate will rise significantly over the course of this decade.”

Reynolds doesn’t believe that “the adoption by average investors is keeping up with the regulator. There's a full spectrum of people that would happily donate all their money to a cause and another that are very happy buying tobacco and firearms because they think there's a good return there. The reason for investing in ESG from a returns perspective is because governments are promoting ESG in their fiscal policies, which means that things like clean energy and EV infrastructure have a lot of government support, which probably helps the returns on those parts of the industry be quite strong.”