Robo Advisors in Singapore: Ultimate Beginners Guide

The interest in robo advisors in Singapore has been growing quite rapidly since 2019. An increasing number of young Singaporeans are looking for practical and low-cost investment options. Therefore, causing the demand for robo advisors to rise.

If you are looking to start financial planning, you must have considered engaging a robo advisor’s investment service. However, it is essential to properly understand this new form of digital financial planning.

After all, you are going to be investing your hard-earned money. Be it with a financial advisor or a robo advisor, it is only right that you understand everything about robo advisors.

In this ultimate guide for robo advisors in Singapore, we cover every aspect related to it. We also weigh in on the pros and cons of robo advisors. This way, you can make the most informed decision for yourself.

 

What are robo advisors?

Robo advisors are “digital” advisors that require minimal to no human intervention. Instead of a financial advisor, your financial planning is purely driven by algorithms and mathematical rules.

When developing a robo advisor, many groups of people come together to design and encode these algorithms into the robo advisor. They include investment managers, financial advisors, data scientists, and programmers.

The initial input takes place with human help. But robo advisors mostly run on data and software without human assistance. Robo advisors help clients in allocation, management, and optimisation of funds as well as assets.

 

How do robo advisors work?

As highlighted above, robo advisors work without or with very little human intervention. The precise dynamic of how robo advisors work will vary slightly from one investment platform to the other.

But in general, all robo advisors follow the same working principle.

 

Step 1: Questionnaire

Filling up an extensive questionnaire is the first step you’ll have to take when signing up with a robo advisor.

These questions cover everything about your current financial situation and goals. It can include topics such as your savings balance, the timeline of your investments, and your risk tolerance.

From there, they will categorise you into separate risk profiles.

 

Step 2: Your Deposit

The next step is to put in your investment amount and fulfil the minimum requirement set by the platform. You can choose to put as much money as you want, depending on your financial capacity.

You also get to choose between putting in your money as a lump sum investment or by recurring deposits.

 

Step 3: Invest

Your robo advisor will proceed to make purchases for your portfolio that is most suited for you. This typically includes a mix of Exchange Traded Funds, or ETFs investments, and other assets.

The algorithm chooses the available funds within its own platform. And it corresponds to your profile, the current condition of the market, and your investment goals.

In this step, the asset allocation will be highly based on the questionnaire you filled up. Therefore it is important to take step 1 seriously so that the robo advisor can categorise you into different risk profiles based on your risk appetite.

 

Step 4: Monitor and optimisation

Robo advisors continue to monitor your funds as well as the market. In addition, your robo advisor will also perform portfolio rebalancing.

This step is critical to give you maximum earnings and maintain optimal asset class weightings. Rebalancing your portfolios also minimises the risk in cases where the market shifts.

 

 

List of robo advisors in Singapore

The rise of robo advisors in Singapore for retail investors is nothing new. So there are a good number of robo advisors for you to choose from.

Therefore, we have decided to compile a comprehensive list of all the robo advisors in Singapore. We have also included their fees, minimum requirements, and of course, their specialty.

Note: All currency units are in Singapore dollars unless mentioned otherwise.

 

EndowUS

EndowUS was started in 2017. And they also run exclusively on the web.

• Specialty – Investment in Funds
• Fees – 0.4% for CPF and SRS portfolio, 0.25%-0.6% for Cash portfolio
• Minimum requirement – $10,000

 

UTrade Robo

UTrade Robo also runs its services on their web platform.

• Specialty – Investment in ETFs
• Fees – 0.5% to 0.88%
• Minimum requirement – $5,000

 

Philip SMART Portfolio

Philip SMART Portfolio runs exclusively on their web platform.

• Specialty – Investment in ETFs as well as individual stocks
• Fees – 0.5% + SGX clearing fees where applicable
• Minimum requirement – $5,000

 

AutoWealth

AutoWealth is one of the pioneers among robo advisors in Singapore. Established in 2015, AutoWealth provides its service exclusively on their web platform.

• Specialty – Investment in ETFs
• Fees – 0.5% + USD18 of platform fee
• Minimum requirement – $3,000

 

FSM MAPS

FSM MAPS began their robo advisor journey in 2013. They run their services on the web as well as on their mobile platform.

• Specialty – Investment in ETFs
• Fees – 0.35% (Conservative portfolio), 0.5% (Other portfolios)
• Minimum requirement – $500 per month, $1,000 lump sum

 

DBS digiPortfolio

DBS digiPortfolio operates under the flagship of DBS Pte. Ltd. This service runs exclusively on their web platform.

• Specialty – Investments in Funds as well as ETFs
• Fees – 0.75%
• Minimum requirement – $1,000, and a Multi-Currency Account

 

OCBC RoboInvest/OCBC Bank

OCBC RoboInvest runs on both the web as well as their mobile platform. It operates under OCBC Pte Ltd and has been running since 2004.

• Specialty – Investment in ETFs and Individual Stocks.
• Fees – 0.88%
• Minimum requirement – US$100

 

Kristal.AI 

Kristal.AI operates in three countries, and they started their services in 2016. Kristal.AI operates on both their web and mobile platform.

• Specialty – Investment in ETFs and Individual Stocks.
• Fees – 0% (below US$50,000) to 0.3% (above US$50,000), excluding custody and asset operating fees
• Minimum requirement – US$100

 

MoneyOwl

MoneyOwl is a joint venture of Providend Holding Pte Ltd and NTUC Enterprise Co-operative Ltd. Their services are exclusively on their web platform.

• Specialty – Investments in Funds
• Fees – 0.5% to 0.6%
• Minimum requirement – $50 per month,  $100 lump sum

 

 UOBAM Invest

UOBAM Invest has offices in a couple of countries. Their platform of operation is also exclusive to the web.

• Specialty – Investments in ETFs
• Fees – 0.6% to 0.8%
• Minimum requirement – $1

 

Syfe

Syfe is a robo advisor in Singapore licensed by the Monetary Authority of Singapore. This robo advisor operates on the web as well as their mobile platform.

• Specialty – Investments in ETFs
• Fees – 0.4% to 0.65%
• Minimum requirement – None

 

StashAway

StashAway began its services in 2016. Their services are on the web as well as their mobile platform.

• Specialty – Investments in ETFs and Personal Funds.
• Fees – Between 0.2% to 0.8%
• Minimum requirement – None

 

SquirrelSave

SquirrelSave was started by some of the top experts in the industry. They are exclusive to their web platform.

• Speciality – Personal Funds, insurance and healthcare.
• Fees – 0.5% + 10% of positive returns
• Minimum requirement – None

 

GrabInvest

GrabInvest is a new offering from Grab after it acquired Bento in 2020. It is essentially a wallet and runs on both the web as well as their mobile platform. GrabInvest runs in partnership with Fullerton Fund Management and UOB Asset Management.

• Specialty – Personal asset management
• Fees – 0.45%
• Minimum requirement – $1

 

Editor’s Note: Smartly, has closed their Singapore offices as of April 2020. However, existing clients on the platform were given 50% off management fees when they shifted to StashAway. The exemption of management fees is up to $50,000. And the offer is valid for the first six months after signing up. This generous offer, however, does not apply if you already use StashAway.

 

 

Pros of using robo advisors

With an increasing number of robo advisors all over, you might be considering how using these automated investment advisors can help you as a retail investor.

Below we share the pros of using robo advisors in Singapore.

 

Low cost/fees

One of the first advantages that most people cite that robo advisors are their low cost. Most robo advisors have a service fee of about 0.2% – 1%. Investment and fund managers will charge you much higher fees just to manage your funds.

Financial advisors on the other hand, either take a commission of each policy sold or have their own advisor fees. These advisor fees are generally lower than investment managers while being higher than robo advisors.

The main reason why robo advisors are very affordable is that it does not involve intensive human labour. Once the algorithm is encoded in the software, the machines do all the work.

 

Ease of access and convenience 

A typical robo advisor is available 24/7 as long as you have access to the internet. This means that you can use robo advisors at any time of the day or night.

In addition, there is no need for physical documents with a robo advisor.

This is not the case with investment managers. For one, you need to set up appointments at specific times. The involvement of an investment manager also means that there’s a third person in the transaction.

 

Minimal requirements

If you’re looking to engage an investment manager or to do it yourself, be prepared to have a large investment amount. This is because most funds have a minimum trading size before you can buy.

Financial advisors however, allow you to have lower investment amounts than investment managers.

On the other hand, robo advisors will work with anyone who meets their minimum investment amount, which is lower than traditional investment managers. In fact, some robo advisors have zero requirements to sign up.

For young adults who are looking for efficient financial planning, this is a fantastic opportunity. Moreover, robo advisors do not charge any fees for deposit or withdrawal.

 

No lock-in or lock-in fee

Another fantastic advantage of using robo advisors is freedom. At the time of writing this guide, robo advisors in Singapore do not have lock-in periods. Not only does this mean that there are no lock-in fees for you, but you can also liquidate your funds anytime you like!

Many financial advisors do not encourage short-term investments as you are unable to see significant returns with the fees eating into your margins. However, with robo advisors, these fees are minimised and/or removed!

It’s even better if your robo advisor does not entail any deposit and withdrawal fees!

 

Diversified portfolio

A diversified portfolio is one of the secrets to financial success. It is because a portfolio that is diversified with different assets minimises the risk involved. And using robo advisors can give you this critical ingredient.

Thanks to the mathematical algorithms, it creates a mix of investments that complements your financial goals.

 

 

Cons of using robo advisors

Robo advisors are indeed an outstanding investment alternative. However, they are not without their drawbacks. So here are the cons of using robo advisors.

 

Limited flexibility and control

Algorithms and mathematical rules drive robo advisors. These rules are pretty much set in stone. This means that you cannot change your investment options after you pick them.

So if you choose ETFs or a mutual fund, you cannot change your plans and choose the stock market, vice versa.

On the other hand, a financial advisor offers more flexibility. You can choose your preferred investment options at any time. Besides, you can also give your inputs to your financial advisor, and essentially customise your portfolio in accordance to your needs, wants, short term and long term goals, and even taking into account subjective and emotional scenarios.

Conversely, algorithms can only work with black-and-white facts and data.

When you invest, you’re aiming to obtain the financial means to achieve your goals and your desired lifestyle. Therefore, you will need to make the correct investment choice, based on your current age and how you would emotionally view risk. An algorithm, unfortunately, will not be able to assess that.

 

Currency exchange vs instability

Robo advisors in Singapore invest a massive amount in ETFs that are US-based. The caveat is that this subjects your funds to the exchange rates in the international market.

Although the exchange rates tend to fluctuate, the current situation in America is more volatile than ever. Therefore, you may not get your money’s worth. Besides, currency conversion fees can put a further dent in your wallet.

Robo advisors may or may not be smart enough to examine market trends and market volatility unlike financial advisors and investment managers. The ability to do this is extremely crucial to protect and/or maximise your investments.

 

Hidden fees and taxes

Robo advisors indeed have lower fees than human advisors. However, several hidden costs can eat away your investment. Despite them being low cost, most of these fees are recurring.

These recurring fees can accumulate into a considerable amount over time. Besides, you have to consider components such as fund-level fees, conversion charges, and subscription fees. These fees, unfortunately, might not be known to you until incurred.

As mentioned, robo advisors in Singapore purchase many Exchange Traded Funds from the US. So there is a concern for US dividend taxes. Currently, the dividend tax for all US-based ETFs stands at 30%. Therefore, the final amount that will reach your hands will be significantly lower.

Most robo advisors will not tell you about this dividend tax aspect. It is mainly because the tax dividend are not featured in the projections in the algorithm. Nevertheless, you cannot be exempted from paying this tax.

 

Misconceptions about robo advisors in Singapore

Many people think that using robo advisors is safe because the algorithm programmed will choose a “safer” investment portfolio for you. Just because the algorithm is designed to make investing simple for you, does not mean it is designed to beat the market

Yes, the mutual funds and ETFs purchased by these robo advisors are generally considered as a safer investment alternative to individual stocks. This is because when you invest in ETFs and mutual funds, you will be investing in a variety of companies at once, allowing you to effectively diversify, and potentially optimise returns and minimise risks.

But what this also means is that these funds are subjected to the risks of the stock market and your investments will still be affected by market fluctuations.

You will have to accept that your investments will fluctuate even with robo advisors. The artificial intelligence built is mostly to remove the need for human financial advisors, not for them to beat the market.

 

So… who are robo advisors for?

Having considered everything about robo advisors, robo advisors will be beneficial if you –

• Want an affordable way to start investing
• Want to start investing in the global market
• Don’t have the time to manage your finances actively
• Have little to no investment knowledge and are willing to let algorithms to do it for you
• Want to invest in a simple fashion without taking into account potentially difficult, emotional, or subjective scenarios that do crop up in real life

 

Conclusion

As you grow older and your life becomes more complicated, you will face tougher decisions on how to properly optimise your finances. A robo advisor may not be able to take into account these situations and the decisions you’ll have to face.

Ultimately, whether or not you choose to use robo advisors comes down to personal preference. It’s because they are a fantastic way to invest money for those who don’t have much capital to begin with. But robo advisors do come with limitations. And these limitations are what makes many robo advisor investors disappointed with their investments.

Therefore, consider the changes in your financial status and goals throughout the years carefully before choosing to engage one.

Financial advisors and investment managers are not perfect by any means. And yes, there are many of them who are out just to make money from you.

Despite this, human advisors still have more flexibility and can also give you a truly personalised portfolio. But most importantly, human advisors have accountability. And no robo advisor can beat that.

 

References

dollarsandsense.sg/robo-advisors-in-singapore-what-you-need-to-know-before-investing/

blog.moneysmart.sg/invest/robo-advisors-singapore/

blog.seedly.sg/singapore-robo-advisor-investment-comparison/

en.wikipedia.org/wiki/Robo-advisor

www.investopedia.com/terms/r/roboadvisor-roboadviser.asp

 

source https://singaporefinancialplanners.com/blog/robo-advisors-singapore/