Schroders is orienting its business toward providing more value to its wholesale distributors, including those in China. This is the impetus to the firm’s recent acquisition of a minority stake in Singapore-based robo advisor WeInvest, says Lieven Debruyne, the firm’s Asia-Pacific CEO.
The deal, announced in May, saw Schroders lead a S$16.5 million ($12.1 million) Series A funding in the startup, which opened doors in 2015. WeInvest provides digital wealth services to financial institutions, with operations in Southeast Asia, Hong Kong, India and Dubai. Schroders now joins a number of leading asset managers partnering with or acquiring robo advisors.
Debruyne says digital technology is driving “mass customization” across the investments industry. “How do you provide service and engage with the client?” he asks. “We want to change our interaction with distributors, from being just a product provider to a partner that brings them solutions.”
He says the WeInvest deal is the culmination of a need to differentiate Schroders in the wholesale markets in Asia Pac. It represents a B2B2C play. WeInvest was built as a B2B robo, developing digital wealth solutions for banks, brokers and insurers. Schroders wants to harness that capability so it can go into a wealth management organization, hand in hand with WeInvest, and discuss how it can help distributors design products and engage with their end consumers.
“The future of our business is providing customized solutions, not commoditized products,” Debruyne told DigFin. He points to the ubiquity of separately managed accounts in the U.S. and the growth in Australia’s self-managed superannuation funds industry as evidence for rising demand of personalized services.
Looking for partners
But this is not a trend that traditional investment firms can easily follow. Schroders built its business in most Asian markets on actively managed mutual funds, which by their nature are pooled investment vehicles. Most of the region is dominated by wholesale distribution, further removing fund houses from their end investors. And the likes of Schroders aren’t really capable of changing this on their own: “We’re not a tech company, we’re an investment company,” Debruyne said.
Last year the firm began to look for partners. In its home market, the U.K., Schroders acquired Benchmark Capital, which is also a digital wealth provider catering to independent financial planners (a huge market in Britain). In Asia, the management cast about for something similar, and was impressed with WeInvest’s technology and multi-market capabilities.
Changing the discussion
Debruyne says the point of the relationship is not to push Schroders’ funds on distributors. Distributors already work with many providers, and WeInvest has other manufacturers contributing to its products.
(These include thematic funds, quant strategies, and passive portfolios. WeInvest also enables customers to aggregate their various investments, and gives relationship managers tools for advice and investment ideas.)
The underlying products may not change, but the WeInvest relationship will let Schroders speak with distributors about how to meet changing client demands. In turn, the firm can use its existing relationships with distributors to open doors for WeInvest.
The deal also needs to be considered in context. It is part of a broader digital strategy at Schroders – and it is taking place in a region where the firm sees plenty of growth opportunities.
The deal in context
The firm established a data-analytics team in London to help its investment managers improve performance, a capability that has recently extended to Singapore. And for two years now, Singapore has served as its global center for robotics processing automation, helping deliver efficiencies in the back and middle office.
Last year the firm also introduced Schroders GO in Singapore, a chatbot to help the firm’s wholesale service teams provide information to distributors; this capability is scheduled to roll out to other Asian markets this year.
In terms of markets, Debruyne says China is now front and center of all strategic discussions. Although it contributes a relatively small part of the firm’s assets under management, China is seen as the biggest growth story, thanks to regulatory changes, index inclusion, new ways to connect to its capital markets, more channels to conduct business internally, and the rise of its middle class.
With this backdrop, Debruyne sees plenty of opportunity to work with distributors in China and showcase WeInvest’s B2B2C capabilities.
Schroders has direct-to-consumer business in the U.K. (where it has a minority stake in B2C robo Nutmeg) but not in Asia, aside from a small high-net-worth segment.