While COVID-19 has accelerated the disruption in traditional banking and payments, with fintech introducing viable operating models and services or better experiences, the disruption in the industry has, in actual fact, been taking place for several years now.
Though relatively nascent, the digital wealth management space has also come to the fore during the pandemic, and there is no reason why it won’t soon become as ingrained in our lives as, say, mobile banking.
I would like to share three learnings from my journey so far as a founding member of digital wealth management platform Syfe, which I hope will inspire anyone with aspirations to start their own venture in the space as we move into a post-COVID world.
Understand unmet needs
In an environment where the value of savings in a bank account gets eroded over time because of rising inflation and low-interest rates, placing a part of your income into investments – which deliver higher returns over the long-run – has become a necessity.
While “having enough for the future” is a major financial need for everyone, traditional wealth management services have always been geared toward serving the high-net-worth – or approximately only five per cent of the population.
For those that do not qualify for services such as premier or private banking, they are often left with the option of lower-grade investment solutions when they approach traditional banks.
This problem is felt by those that have a sizeable amount of savings, a part of which they are willing to put into investments, and yet are unable to enjoy the same solutions that are offered to the premier or private banking clients.
Having identified this as a pain point for the remaining 95 per cent of the population, which includes the emerging affluent population, digital wealth managers have designed technology-driven operating models and automated platforms to allow anyone to start investing at any amount while offering much lower and affordable annual fees.
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Interestingly, better off individuals who have access to sophisticated solutions are also finding value in such platforms. We witnessed high-net-worth individuals seeing merits in our digital approach towards wealth management, and the COVID-19 pandemic has accelerated the adoption of such wealth management experience, which provides the convenience of digital services and significantly lower fees.
Design your model or products to account for human emotions
In the course of developing your model, you should acknowledge that the ‘purchasing decisions’ of your prospective customers are often emotionally-driven. We believe that by carefully addressing these emotional intricacies and having a solution that responds to them, we’ve been able to grow Syfe’s platform users by more than 10 times in the first nine months of 2020.
According to research we conducted in 2019, 62 per cent of Singaporeans, for instance, do not invest enough because they feel that investing is too complicated.
For newer investors, fear of loss when there are wild market swings can often lead to panic selling. In the same vein, investors who are excited by the prospect of day traders’ returns from stock picking might feel compelled to do likewise, while being unaware of the saying that 90 per cent of such traders actually lose money.
To address this, we ensure that our content for market education is as jargon-free as possible. Our investment strategy focuses on diversification.
We, therefore, design, monitor and rebalance individuals’ portfolios based on each person’s risk appetite to minimise losses during market swings, so they avoid panic selling but instead remain well-positioned to capture the gains when the market inevitably bounces back. Anxious investors might sometimes need a listening ear, so unlike pure-play robo-advisors, we have human wealth experts available to speak.
Secondly, the emotions of your frontline employees must likewise be considered and built into your servicing model. Traditional wealth managers have commission-based fee structures. Syfe has steered clear of a commission-based fee structure when remunerating our wealth experts, and therefore ensuring that they have no interest other than their clients.
Be honest with yourself about what you know, and what you do not know
Finally, if you’ve dreamed up a business idea to disrupt a specific sector, it’s highly probable that you already have a good amount of expertise and experience in that field. That said, it always helps to surround yourself with experts in the skills you do not possess or other individuals in your field who can constructively play the role of a devil’s advocate.
The idea of Syfe came up when Dhruv, our CEO, was an exchange traded fund portfolio trader at UBS almost a decade ago. He knew that the success of Syfe would require a team’s effort, and started recruiting talent to help him realise his vision.
Also Read: Wealth management need not be complex, if WeInvest can help it
I joined Dhruv a few months before Syfe launched to lead distribution. We have a fully in-house, dedicated team of software engineers to build the actual digital wealth management platform from scratch. Our PhDs and portfolio construction experts – who used to work at prominent investment banks – were responsible for developing the algorithms and strategic investment approaches that underpin each product.
Our first few years as a team, running Syfe, have been as challenging as they have been rewarding, and 2020 has been especially tough. What continues to motivate us though is that, despite significant growth in the volume of assets managed by digital wealth managers, it still represents only a fraction of what traditional wealth managers hold. The digital wealth space has huge potential, and we’re excited about what 2021 will hold for us, and the wider industry.
As COVID-19 continues to change the way we live, work and play, and as industries’ operational rulebooks get thrown out the window, I am excited about a new generation of high-growth businesses emerging to both challenge and collaborate with established players, so that industries can be reshaped to fully cater to our new behaviours and preferences.
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