Lu International, the Singapore business of Ping An Group’s wealth management business, Lufax, officially opened for business last week.
Although traditional fund managers have expressed worries about disruption from Chinese internet companies, for now, Lu’s offering doesn’t look likely to pose such a threat – at least, not yet. Its product, Lu Global, is an online portal to third-party funds. It’s the first step along a much longer road.
But it’s also now here.
Lu Global will be cheaper than a bank, as it is charging only a US$25 flat fee per sale – as opposed to the 2% to 4% front-end loads that banks typically levy on funds they sell. (Lu will also charge a US$20 fee when customers withdraw.)
The platform won’t be competing against ultra-cheap, direct-to-consumer robo-advisory platforms. It is offering investors access to actively managed funds, whose manufacturers charge their own fees, which vary by product.
The company has announced partners include J.P. Morgan Asset Management and KKR, although a glance at the app shows names such as BlackRock and Pimco, too.
Moreover, Lu’s capital-markets license lets it accept only accredited or institutional investors from Singapore (although any investor, including retail, can buy funds off the app from other countries). These are wealthy people who may like Lu Global for its convenience and ability to invest in funds at smaller ticket sizes, but they already have access to a wide range of wealth services.
Out of the gate
Kit Wong, Lu International’s CEO, says the company is considering adding advice. “We’re looking at robo advisory,” he told DigFin. But nothing has been decided.
Wong says Lu Global’s value proposition is the convenience of transacting anywhere, any time. “It’s not a supermarket,” he said. “We select the products.”
Using Ping An technology, the app onboards customers and assesses their risk tolerance; it similarly ranks its products. It does not provide tips to investors on what to buy, but it does apply suitability rules: if a customer wants to buy a product deemed too risky for them, the platform either displays additional disclaimers or, if the gulf is too wide, prohibit a sale.
If you're looking for a magic algo, it doesn't exist
The only steer that Lu Global gives right now is information on various investment themes, such as healthcare, and lists relevant products.
But there’s not yet the customer experience and data to offer the kind of personalized service that Lufax provides in China.
“If you’re looking for a magic algo, it doesn’t exist,” Wong said. Given Singapore’s small population and the fact that Lu Global is brand new, “It’s going to take a long time and a lot of investment to grow our customer base,” he said. The company aims to onboard 10,000 customers by September 2019.
The digital app is meant to be easy for users to set up an account and transact. Once a subscription to a fund is confirmed, the back-end processing is industry-standard.
Wong says now that Lu Global is released, the company is working on enhancing its value. On the product side, Lu will add different kinds of products beyond mutual funds, such as structured deposits or access to private equity. Currently everything is denominated in U.S. dollars, so additional currency tranches are in the pipeline.
On the experience side, Wong says Lu is working on turning a fairly static app into one with video and animation, to help explain products and investment themes.
“We want to use different media because these can better explain concepts, especially to a mass audience,” he said. “Consumers on mobile have shorter attention spans.”
Such ideas may apply to customer onboarding as well as investment education, to keep people engaged – at its fastest, Wong says, it takes eleven minutes to onboard a new customer, but even then, distractions like an incoming call or message can derail things.
What about opening Lu Global to retail investors in Singapore? Wong says it’s a long-term ambition, but there is no plan for that.