Crossbridge Capital is working to augment its robo-advisory service, Connect, with self-directed trading for its high-net-worth clients in Singapore.
Charlie O’Flaherty, head of digital strategy and distribution, says the digital service is being rebranded ConnectPrime and is being readied as the firm looks to enter new markets in Southeast Asia this year.
Bambu, a robo-advisory company in Singapore, led the development of the original Connect platform, which launched in 2016, and is also working on new iterations. The product is based on helping customers achieve specific goals (e.g., pay for a house or a child’s education) and investing in actively managed certificates holding a variety of instruments including exchange-traded fund portfolios to achieve that.
Crossbridge, which is based in London and manages US$3 billion of client assets globally, was established in 2008 to service rich clients; it launched Connect to cater to people who are wealthy but not wealthy enough for big private banks, which have been steadily raising their net-worth minimums.
In Asia, it has found a niche servicing expatriate Americans, by leveraging its clearing broker, Pershing, which continues to support the expensive administration of U.S. tax.
O’Flaherty joined in 2015 with a mandate to develop a digital means of engaging with clients, particularly younger ones. He developed Connect, which first launched in 2016 and was recently upgraded to allow for digital KYC and client onboarding.
With Connect, Crossbridge serves as the portfolio manager and handles compliance such as KYC. It selects the underlying securities and Bank Julius Baer (a Crossbridge shareholder) structures these into a certificate for customers. Morningstar provides research and portfolio ideas, while Pershing, a subsidiary of BNY Mellon, provides clearing, settlement and custody.
O’Flaherty said: “What we have now with Connect is a first-generation robo, in which the customer selects a goal, respond to a survey about risk appetite, and receive a recommended portfolio. With Prime, we’re adding self-directed trading.”
He says a version 3.0 is now at the white-board stage with Bambu, but declined to say what kind of features are being considered.
Entering new markets
Crossbridge intends to enter two more markets in Southeast Asia this year with Connect and is now building networks of relationship managers.
It will continue to operate tts traditional, non-robo business separately. Crossbridge works with a dozen private banks as more orthodox distributors; that business, including its custody and research functions, has been ringfenced from Connect.
Connect still accounts for a very small percentage of Crossbridge’s Singapore business, but has grown enough to validate the decision to invest more in it, O’Flaherty says.
“It’s a big push as we go cross-border in Asia,” O’Flaherty said. New markets require local-language websites and tailored products. Directed self-trading via digital channels will at some point be added to the mix.
However, ConnectPrime is likely to remain with Pershing rather than be expanded to other partner banks. “We might be stepping on the banks’ toes if we tried to do this on their platform,” O’Flaherty noted.
Singaporean banks are developing similar capabilities. The robo-advisory space has become commoditized, and providers are looking for ways to differentiate their offering or otherwise gain an edge.
Mark Nelligan, who runs the Singapore business at Pershing, says one reason his company is partnering on Connect is because the platform is aimed at rich customers. He sees robo-advisors in the U.S. chasing the retail investor, but believes going after higher segments is more likely to succeed.
“I don’t think robo advisors in Asia are sustainable, and in fact they are disappearing,” he said. “Only the ones going after high-net-worth clients are going to work, particularly as private banks raise their cutoff levels” of client net worth.