Yunfeng Financial Group, the financial services company backed by Alibaba-billionaire Jack Ma, has created a robo adviser to manage the wealth of Chinese and Hong Kong small investors.
Advisers wondering about the possibility of Amazon or Google dispensing financial advice should pay attention to China, where a model for tech giants to enter digital wealth management and serve millions of small investors may evolve.
The digital advice market in China presents opportunities for American involvement too: U.S. fund companies are already seeding their offerings in Chinese digital platforms, and two American executives recently launched their own robo aimed at attracting Chinese investors.
Yunfeng's service — called Youyu — targets anyone who has a bank account in Hong Kong with at least $800 to invest. Yunfeng expects to attract tens of thousands of investors by the end of this year, said Yunfeng CEO Li Ting.
Yunfeng, backed by the founder of Alibaba, joins a host of financial service outfits employing technology to home in on China’s financial markets. Alibaba, Tencent and Baidu, China's e-commerce giants, have all branched into banking and payments, as well as selling mutual funds.
Yunfeng wants to use its app to go after lower-income Chinese and Hong Kong investors who’re keen on buying securities overseas. That’s a market segment too costly for most traditional financial institutions to cover, because of the sheer number of potential clients.
Yunfeng, which already caters to wealthier people, hopes that creating an app to automate procedures such as risk-appetite assessment and know-your-client checks will make its services more accessible to less-wealthy individuals. About 70% of mainland Chinese investors surveyed by Hang Seng Bank in January said they planned to increase their global allocation for investment in the next 12 months.
“Traditional institutions, their client base is quite limited, the resource is quite limited. They cannot provide the services,” Li said. “But for fintech, actually we can serve millions of clients online at the same time.”
Yunfeng’s Youyu app currently partners with 13 global mutual and money market funds, including those run by Franklin Templeton Investments and Manulife Financial. Youyu will generate investment advice for users based on their risk tolerance, but also let them allocate money based on personal decisions, said Li. Clients can then track the returns and compare which is superior.
Financial institutions around the world are turning to technology to reach investors and fend off increasing competition from internet firms. In the U.S., several wirehouses and large broker-dealers have adopted or developed digital advice platforms.
In Hong Kong, more than 75% of customers are willing to receive automated advice for financial services products, from banking and insurance to investments, according to a survey by Accenture. That was close to the average in other markets such as the U.S., U.K. and Singapore.
Chinese financial-technology investments this year may exceed 2016’s record $10 billion as companies continue to raise funds for expansion and big banks grow their digital services, said Albert Chan, managing director of China financial services at Accenture.