Funds, wealth management companies seek to make portfolio-building scientific and automated for small investors
|A man takes pictures of a robot at a financial tech expo in Wuhan, Hubei province, in May last year. (Provided To China Daily)|
CreditEase Corp, a leading Chinese peer-to-peer or P2P lending and wealth management company, launched ToumiRA, a computerized investment advisory service, or "robo adviser", if you will, in late June, to help small investors create global portfolios inexpensively.
ToumiRA will target individuals with small and medium assets, according to Tang Ning, chief executive officer of CreditEase.
"Robo adviser" will help build investment portfolios using algorithms and investors' completed questionnaires about their investment goals and risk tolerance. Human intervention - it's an euphemism for emotion-laced investment decisions - will be minimal, according to the company.
"The automated investment service will help individuals create portfolios globally and more scientifically," said Tang.
Traditionally, it would be difficult for individuals, especially less affluent clients, to seek investment advice from professional wealth management experts, according to Tang.
"The automated wealth management service is a smart and scientific technology on mobile terminals that individual investors could use to invest globally and inexpensively," said Tang.
According to him, the computerized "robo adviser" can assess reports from hundreds of clients a day.
"In traditional wealth management, no more than 10 such reports are assessed by experts a day. Thus, the automated wealth management service will greatly decrease expert fees and increase efficiency," Tang said.
The company is developing big data technology to help evaluate individuals' creditworthiness.
"By adopting big data technology, we are able to provide inexpensive but better services to our customers," Tang said.
Several large Chinese asset management companies have started using the technology.
They are emulating some overseas banks and financial organizations, including Germany-based Deutsche Bank and New York-based Betterment LLC, that introduced free automated investment plans. Such programs work on computer algorithms that create portfolios of exchange-traded funds.
According to Frank Wang, managing director of wealth management, CreditEase, robo advisers could spawn a market worth more than 2 trillion yuan (US$298.9 billion) by 2020.
"The booming market is mainly based on popular online wealth management and financial technologies," Wang said.
As of Monday, more than 3.39 million individual investors have registered on the ToumiRA platform, investing over 17.9 billion yuan in global assets, according to CreditEase.
In addition, the booming mobile internet industry will help promote robo advisers to a wider base of investors sooner than later.
"We are now talking about smart solutions and automated services almost in every traditional sector, such as furniture, automobiles and aircraft industries. The wealth management sector will not be an exception (to this trend). It will also introduce smart solutions and technologies in the near future," Wang said.
According to Wang, ToumiRA currently operates using US dollars, with financial products covering developed countries, emerging economies, and the Asia-Pacific region.
"We will soon launch services, allowing use of domestic currency in asset allocations," Wang said.
Wang An, chief brand officer of Caifupai, belonging to the New York-listed Noah Holdings Ltd, a wealth and asset management services provider, said robo advisers will be key to supplementing traditional wealth management.
Caifupai, which was launched in 2014 by Noah, is a proprietary internet finance platform to provide financial products to aspiring high-net-worth individuals and enterprises in China.
"But it will take some time for the automated wealth management tools to really provide services for individual investors as the country has yet to develop a large database of users of online wealth management tools," Wang said.
"At this time, most Chinese people would be willing to invest in stocks rather than through online asset allocation tools," Wang told stockstar.com.