As fintech expands, many the Republic’s start-ups are now focusing on one sector: wealth management.
What’s it like working in the burgeoning local ‘wealth-tech’ industry and what challenges lie ahead? We spoke to three finance professionals-turned-entrepreneurs to find out.
Freddy Lim was global head of derivatives strategy at Nomura and is now co-founder of robo-advisor StashAway. Gina Heng is an experienced investment manager who also runs Miss Kaya, an online money manager aimed at Asian women. And former Credit Suisse private banker Dominic Gamble is the CEO of WEALTH, a platform linking rich people in Asia to professional services.
Why start up in Singapore rather than another Asian city?
Lim: North America and Europe are far along in driving technological innovation to transform the wealth management industry. But Asia is not far behind and Singapore is at the epicentre of this massive shift. Entrepreneurs recognise that Asia is ready for this shift, because consumers here have indicated that they’re open to digital wealth management.
Another indicator that Asia is ready for fintech firms to transform wealth management is that regulations are moving to accommodate new technology. MAS has made it a priority to create an effective regulatory environment to both foster innovation and protect consumers. With the right regulatory framework and government support, Singapore-based start-ups will be able to expand across Asia Pacific and globally.
Heng: Singapore is already a well-known global asset management and trading hub. And its well-structured legal system, tax benefits, and access to global markets make it attractive as a location for wealth-focused start-ups. The government and regulatory support are among the best in the world.
What are the challenges of establishing a wealth-tech start-up in Singapore?
Gamble: Just because large wealth businesses are here doesn’t mean you automatically have support or customers for your start-up. As some Western banks retreat, it’s the local private banks – plus UBS and Credit Suisse – that are the sources of tech innovation via their new innovation centres and sponsored accelerators. That’s great for fresh start ups, but not so good for companies at series-A stage and beyond, which need a depth of investment capital sometimes not easily found in Asia.
So the real challenge in Singapore is whether start-ups can gain a foot hold and grow. Don’t underestimate how non-entrepreneurial the wealth industry is in fostering new technologies, let alone acquiring start-ups. The big banks in Singapore are doing a lot of tech-related PR at the moment, but most of it is talk. The next few years will be a test to see whether wealth-tech really has a profitable future for start-ups here.
Heng: Compliance is a big challenge. Even though Singapore offers one of the best legal frameworks in the world, it’s not always easy for start-ups to clear required licenses by themselves. Competition is also intensifying in wealth-tech, with more players in the market than before. Singapore has a strong pool of talent in our sector: from smart young entrepreneurs to former bankers, fund managers and wealth managers.
Lim: We were the first robo-advisor to receive in-principle approval for a retail fund management license from MAS. But being pioneers in this space has its disadvantages: customers need to learn about new products, service models, and paradigms.
Where is the Singapore wealth-tech sector heading over the next two years?
Gamble: There’s still not saturated competition – there’s a lot of space for new start-ups in Singapore. The robo-advisor and insurance-tech spaces will start to get crowded in coming years, but otherwise there will be plenty more growth.
Heng: We’ll see improvement in customer adoption. Millennials won’t mind bypassing traditional banks in order to enjoy the alternative benefits of holding their wealth in new fintech services. The retail investor segment is becoming increasingly familiar with these new technologies and platforms.
Is the future for Singapore wealth start-ups about partnering with large institutions, or challenging them?
Lim: Both will happen: banks will partner with start-ups while at the same time some stand-alone platforms will succeed in offering services directly to consumers. The proliferation of fintech in everyday life will in turn incentivises traditional asset managers to collaborate with fintech firms.
Heng: We can expect more cross-sector competition. Most of the banks have their own fintech or innovation arms and large tech companies are coming into the market too. Wealth fintech start-ups will need to know how to compete or partner with those players. For example, the biggest competitor to Singapore robo advisors might not be DBS, but rather Facebook or Alipay.
Gamble: Challenge the banks at your peril. We may like to criticise them, but the fact is that they have the branding and power to crush most competition, especially as some Western banks retreat and the wealth market becomes smaller. Asian clients like brands, so they have a huge advantage over some start-ups. B2C robo-advisors forget how hideously expensive client acquisition can be
Singapore is trying to position itself as the best city in Asia to start a fintech firm – it’s running fintech festivals, launching a regulatory ‘sandbox’, and creating co-working spaces.