Automated 'robo advisers' likely to be seen next year
RUN-OF-THE-MILL investors who don't have access to huge amounts of money may soon be able to lower the costs of managing their personal finances by using the services of automated investment advisory firms, or "robo-advisers".
This followed the rules on the crowd-funding business announced by the Securities and Exchange Commission in May. This is part of the authority’s strategy to brace for systemic changes to strengthen businesses related to the capital market.
“Progress on this matter, which is under study by the SEC, could be seen next year,” said Tipsuda Thavaramara, deputy secretary-general of SEC in charge of policy and corporate finance.
Robo-advisers, which are popular in the global capital market, can be categorised into two types, fully automated investment advisers and hybrid advisers, which typically charge lower service fees than traditional firms. They use algorithm programs, for example, to provide advice to investors.
For the first type, there is no minimum for investments, and fees are only 0.25-0.5 per cent of the investment total. The hybrid advisers deal with investments of at least US$100,000 (Bt3.6 million) with service charges of 0.3-0.9 per cent, according to a study of overseas markets by the SEC.
Meanwhile, traditional firms such as asset-management companies focus on high-net-worth investors, and their minimum investments are $2 million on average. The fees charged by such companies are about 1 per cent.
According to the study, the services of robo-advisers are limited to a few types of financial products such as exchange-traded funds, index funds and stocks. The advisers are not allowed to manage their clients’ investment portfolios.
Traditional advisers, on the other hand, can offer tailor-made investment services in addition to advisory services for their clients in various products such as bonds, options, commodities, and structured products apart from ETFs, index funds and stocks.
“Robo-advisers are likely to capture the [lower-end] market segment, in which potential customers are people approaching retirement,” Tipsuda said. She added that traditional advisers would then be forced to improve the quality of their services, possibly by adopting new technologies.
