Asset & Wealth Management
Apples and oranges: comparing Asia’s robo advisors
A Singapore-based financial planner ranks B2B and B2C robo advisors. Who’s got the juice?
A financial planner based in Singapore has developed a metric to compare robo advisors in the region – which she says provides insight into which players have the most depth and resilience, be they in the B2B or B2C space.
Elena Okhonko’s ranking puts a quartet of robos from Hong Kong and Singapore on top: Privé Technologies, Lumiq, Quantifeed and Additiv.
Among the 16 robo advisors that participated in her analysis, she judged only these four are “enterprise-level solutions”, led by veterns of the asset-management industry and quantitative analysts. All four are B2B providers.
At the bottom is another quartet of consumer-facing solutions that rely on what Okhonko describes as simplistic models and limited service offerings, including offerings from OneWealth, Smartly, AutoWealth and 8 Securities’ B2C robot, Chloe.
Okhonko says she developed an analysis based on portfolio construction maturity, which is a way to compare services with different audiences and different performance methodologies. The 16 companies answered a questionnaire that analyzed their models and compared them to established academic literature on the subject of portfolios.
“There isn’t the data to judge historical performance,” she told DigFin, “but the fundamentals of portfolio construction don’t change…I’m relating models, not performance.”
Is it apples and oranges?
One head of a robo firm that didn’t perform especially well in Okhonko’s rankings says the process is flawed because it asks the wrong questions.
“We’re a technology company, not a robo,” he said. His company is a B2B provider to about 10 banks in the region. “We build delivery solutions, doing smart artificial-intelligence analytics to work out user behavior. We don’t beat the markets; we automate the process.”
Mikaal Abdulla, CEO at 8 Securities, says the work ignores whether a robo is licensed to actually manage money itself, or is just building tech for someone else. “Algos are theoretical until they’re serving real customers,” he told DigFin by email, noting that businesses should be judged more on how much of the full chain of services they cover, including back office functions, custody, and the scale of their B2B customers.
Okhonko defended the work, saying she was comparing the inputs used by each robo – or tech company – and how they use those factors to build a model.
“A low ranking doesn’t mean someone’s model is ‘bad’,” Okhonko said. “But is it a basic model or a mature one?”
She says banks and financial planners could use this to determine a robo provider’s depth and flexibility.
The research was conducted in 2017 and, given the rapid growth in the industry, may already be out of date. For example, the unhappy robo manager said his firm has added new functionality since Okhonko complied her research.
She hopes to repeat and expand the research, in order to create an index of service over time.
The complete rankings will be made public next month by Okhonko and Kaplan, the education services company.