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在线翻译:
szdaily -> Business
Robo-advisers facing hurdle of taming investors
    2017-June-26  08:53    Shenzhen Daily

Liu Minxia

mllmx@msn.com

AN increasing number of established Chinese financial service companies as well as startups have rolled out app-based wealth management services since early last year, hoping to cashing in on a market that has the potential to become the world’s largest one for robo-advising considering its growing middle class and the popularity of mobile services.

More than 20 Chinese companies so far have put their so-called robo-advisers into use, led by pioneers like CreditEase, which launched Toumi RA in May 2016, Pintec which released Xuanji in November, China Merchants Bank with Machinegene Investment and China Finance Online which started to provide robo-advising services on its Yinglibao platform in late 2016.

Months into their operations, the robo-advisers, or online wealth management services that provide automated, algorithm-based portfolio advice without the use of human financial planners, find that the biggest challenge to the sector is convincing the notoriously speculative Chinese investors to adopt a long-term and diversified investment plan.

“To the majority of China’s retail investors, who have a strong preference for either short-term speculation or fixed-income products, long-term investment and asset allocation are still foreign,” said Frank Wang, managing director of CreditEase and the chief designer of Toumi RA.

As a result, the biggest challenge for the fledging sector is the low recognition and acceptance of the robo-adviser-style passive investment theory to look for long-term, sustainable and stable returns, Wang said.

Wang’s view is echoed by the industry. Sun Xiaoqiao, general manager of Yinglibao, said investors’ muted enthusiasm towards robo-advisers is a bottleneck faced by the industry and that it will take time for both investors and the market to mature.

The core target of the robo-advising industry is the middle class with net assets of a few million yuan, which, according to estimates of The Economist, totaled 225 million in China.

“They have investable assets but not enough to use a full private banking service. Robo-advisers are the most suitable tool for them,” said Wang.

Robo-advisers, according to Wang, will give a first-time user a risk tolerance assessment based on data provided by the user, and accordingly group them into one of nine different risk portfolios before offering tailor-made global asset allocation services.

With minimum investment set at US$500 and management fees waived, Toumi RA, which was ranked No. 1 among Chinese robo-advisers in terms of performance in May, initially focused on U.S. dollar assets and diversified into a new set of yuan-denominated portfolios earlier this month. The portfolios include nine actively-managed mutual funds Wang selected from more than 3,000 yuan-denominated funds.

“My vision for Toumi RA is to help users make money even while they are asleep,” said Wang, previously a manager of a U.S. quantitative fund which managed US$7 billion. “To achieve that, we enable it to be fully automated, which means, investors don’t need to take care of their investment accounts once an investment is made, and Toumi RA will automatically adjust the positions when needed.”

Wang, an investment veteran of more than 10 years, said a successful robo-adviser needs to make money for customers, as well as provide good user experience.

Although growing slowly at first, China is projected to become the world’s largest robo-adviser market thanks to its expanding middle class and the popularity of mobile services, a previous report by CreditEase and Bloomberg said.

In the United States, the rapid development of quantitative investing and big data technology have spurred the development of robo-adviser products since early 2010, represented by leading firms including Wealthfront and Betterment.

Citigroup found that revealed assets being managed by robo-advisers increased to US$18.7 billion globally at the end of 2015, while in 2012 the amount under management was close to zero. China Merchants Securities estimates that assets being managed by robo-advisers in China will reach 5.22 trillion yuan (US$77 billion), yielding annual profits of 10.4 billion yuan for robo-advising players in the country.

 

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Shenzhen Daily E-mail:szdaily@szszd.com.cn