Disruptr chats with Wong Wai Ken, Country Manager, StashAway Malaysia on how much digital wealth management has grown in SEA, what Malaysian investors are looking for now, importance of financial literacy and what’s next for StashAway.
How has digital wealth management grown in SEA and particularly Malaysia over the last couple of years particularly after the peak pandemic years?
[Wong] As the first mover in this space in Malaysia, since late 2018, we have seen the sector not just grow but also endure covid. The importance of investing is also dawning on a new generation of investors looking to grow their wealth amidst a landscape which is increasingly more digital.
Amongst the alternatives which include P2P lending, digital brokers and crypto exchanges, robo-advisors have amassed just over RM1 billion in Assets under Management (“AUM”).
Before Covid, digital wealth management’s low fees were a big selling point especially compared to the traditional unit trust industry which charged 5% sales change and up to 2% in management fees. Whereas robo-advisors tended to have zero sales charge and sub 1% management fees.
Through Covid, the digital interfaces and guidance through an accessible UI was a big plus considering bank branches were closed, and physical meet-ups were limited. Through this period, rapid recovery in equity markets after April 2020 attracted many investors to enjoy the rally.
In the region, we have a presence in Singapore, where the market is maturing, with a number of digital wealth managers that are clear front runners, and large banks rolling out their own in-house robo-advisory product line.
In Thailand, where we launched in 2021, the market is still dominated by unit trusts products, and StashAway is trying to disrupt that market.
What has your customer base development been like in Malaysia? What demography of customers has StashAway Malaysia been attracting and what group of customers would you like to grow and why?
[Wong] Our client base is predominantly professionals in the financial services, tech, consulting and Oil and Gas sectors. 64% of our customers are the main financial decision-makers of their households. The range of our demographic varies, however, as StashAway is built for those focused on building long-term wealth.
Men still make up the majority of our investors globally, However, in Malaysia, 4 out of 10 of our investors are women. This is significantly more balanced from when we began, as back in 2018, only 14% of new sign ups were women. We have also observed interesting investing behaviour from women, who tend to be more conservative than men but invest more consistently through volatile markets.
Do you think financial literacy plays an important role when it comes to wealth management particularly digital wealth management?
[Wong] Yes, financial literacy does play a huge role when it comes to managing funds, regardless of whether it is through a traditional form of investing or digital.
Since the beginning of StashAway Academy, we aimed to bring accessible financial education to everyone. Through the years, we’ve also curated courses focused on women to democratise financial education and narrow the gender investing gap.
To date, we’ve run courses ranging from financial planning and the basics of investing through to thematic investing, cryptocurrencies, NFTs, and investing in female founders and we’re lining up even more initiatives to come.
Our webinars (and seminars) are free, open to anyone, non-commercial and accessible via live webinars and on-demand in our app. Access to high-quality, affordable and intuitive wealth management is a crucial imperative for people to take charge of their financial well-being so is making an informed decision on where you are putting your money and with who.
Earlier in January this year, StashAway introduced 2 new ESG themed portfolios; Environment and Cleantech Thematic Portfolio and the Responsible Investing Portfolio. What was the reception of your customers towards these portfolios?
[Wong] Socially responsible investing or ESG investing has been a big trend in the past 3 to 5 years, predominantly driven by fund managers in Europe having to comply with new investing standards.
We too wanted to bring responsible investing to the wider public and debunk the idea that you would have to sacrifice your ideals in order to accumulate a decent return. We are also in the view that ESG investing is defensive in nature, as investments in high polluting industries are gradually falling out of favour, and valuations have come down.
StashAway launched our ESG-themed portfolios in January after many months of client research which showed a clear preference for responsible investing. The responsible investing portfolio covers developed and emerging-market equities as well as conventional and green bonds, while the thematic portfolio focuses on themes such as clean energy and waste management.
So far, these portfolios have been slow to take off, as the markets have been volatile, and only investors who are ESG conscious and educated on the matter have adopted these portfolios. We aim to ramp up our ESG education over time so we can improve adoption.
Have investors from your observation and data become more conscious about what industries and companies their money goes into?
[Wong] I think clients are certainly more discerning in terms of where they invest than before, but I think that is driven by new asset managers redefining the space, like Cathy Wood, and new trends like ESG. We have seen clients request more specific products like thematic investing and ESG, which has been a factor that led to us launching these products.
However, I always like to emphasise, that at the end of the day it still comes back to risk and return. Thematic portfolios may capture the imagination, what with how we have personally experienced disruption and innovation, but one needs to be aware of the concentration risk and how a thematic portfolio fits into their overall portfolio.
How do Malaysian investors fare in terms of investing into ESG-themed portfolios compared to our counterparts in the region?
[Wong] Malaysian investors are in line with investor’s appetites in other regions for ESG. However, the overall take up rate should increase over time as more education about responsible investing takes place.
What questions (or doubts) does StashAway often face from investors and customers with regards to investing in ESG-themed portfolios?
[Wong] While we may not always receive direct feedback, it’s well known that the industry can attract some skepticism. Ratings agencies, who control how well individual companies score on their ESG metrics, can always adjust their methodologies – which has attracted some criticism.
How one defines sustainable may also differ from a personal to a business point of view. From a business aspect, a company may score highly, if they manage their resources around them in a way that is sustainable for them, but may still have a net negative impact on the environment.
As such investors need to be wary and understand that ESG is as much about risk management, avoidance of fines and bad press, as it is about one’s ideals for the earth.
How much has StashAway grown since its inception and what challenges does the company continue to face as it grows?
[Wong] We have grown from a single country player in Singapore, to a regional player in 5 markets, with over US$1bn AUM from clients. We have done so by being focused on what the client really needs from a wealth manager.
We have also extended our product suite from our flagship multi- asset global portfolios, to cash management products, thematic portfolios, ESG portfolios and now flexible portfolios where one can build portfolios from scratch.
Our biggest challenge remains the volatile markets. In our 5 years, we have endured the Trump Presidency, a global pandemic, the Ukraine war and now rampant inflation. But having endured those headwinds is a testament to the portfolio returns that we’ve managed to generate, which keeps our clients engaged.
Increasingly, we are also facing more competition, as not only new roboadvisors are coming onto the scene, but traditional unit trusts using digital channels like e-wallets and soon digital banks.
With more players announcing their own investment robo-advisors in the market, how does StashAway fare with this? What would you say is your differentiating point?
[Wong] One thing that sets us apart from other robo-advisors in the market is our data-driven approach to investment. We deploy an investment strategy that gives investors a portfolio that has global exposure through multiple asset classes.
Our risk management also enables our portfolios to withstand market fluctuations and economic cycle changes.
StashAway is also one of the few wealth platforms in the world to incorporate fractional shares into its portfolio management strategy. We justify the complexity and cost of implementing fractional shares in our strategy with the fact that fractional shares offer the flexibility, precision, diversification, and efficiency that ultimately enable us to introduce a game-changing investment strategy to every customer, irrespective of their wealth.
More and more startups and companies are facing difficulties due to various economic challenges. Reports have shown that StashAway laid off 14% of its headcount in end-May. What efforts are put in place to brace for difficult times?
[Wong] While we have always been prudent about expanding too quickly, we needed to make necessary measures to reduce our cost in order for us to weather the next 24 months. With rising interest rates, we are aware that the fund-raising environment may be challenging, and as such need to reduce our costs preemptively to endure this period. The tech industry as a whole is also facing this difficulty, and various companies have reduced their workforce or frozen new hires.
Are there future plans for any fundraising rounds?
[Wong] As it stands, we are sufficiently capitalised having raised in 2021. The proceeds have been deployed to deepening our presence in markets which we’ve recently launched and to further develop investment products. Currently we still have a healthy runway and will consider fund raising at an opportune time.
Can you share any future plans for any upcoming products and areas that you will be focusing on?
[Wong] Due to high demand from our customers, we’ve recently launched a new portfolio called Flexible Portfolio – customers can now customize their portfolio to their own preference and include their desired ETFs from a curated list of 55 asset classes.
We’re currently having an ongoing StashAway Simple promotion too which raises the projected returns from 2.4% to 3-3.2% up until 31st December 2022.