Robo-advisors, which offer investors affordable online, customized investment advice and portfolio construction, are entering China at an increasing pace. DriveWealth, a U.S. retail broker, has partnered with China's CreditEase to launch robo-advisory product ToumiRA. ToumiRA will allow Chinese retail investors to invest in U.S. equities and will use its trading algorithms to match investor risk preferences and objectives to the optimal portfolio, DriveWealth said in a press release in June. The product will also expand access to managed portfolios to investors beyond the very wealthy, leveling the playing field in China, the company added. Separately, Pintec, a leading Chinese wealth management product platform, said it is also looking to push out a robo-advising service in China soon to tap investor demand.
It is not only established firms entering the market. Startups have also launched machine-assisted portfolio allocation to attract retail investors. Micai, Qianjing.com and Clipper Advisor are such start-ups.
Wealth management is not new in China: fund management products have been sold by banks and online for years. Even so, the industry is very product and sales-driven, and personalized fund management has been restricted to high-net worth individuals. Therefore, robo-advisory will be game changing as it allows regular retail investors access to managed portfolios.
Another big draw for Chinese investors is the access to overseas markets. ToumiRA, Micai and Clipper Advisor all emphasize access to global stock access in their offering. Traditionally, Chinese investors have been under-allocated on global stocks, as the available channels, such as Qualified Domestic Institutional Investor program, are not very popular. Even so, as the Chinese yuan depreciates, more and more investors are searching for returns from overseas.
As more and more robo-advisors enter China’s market, the success of these companies will depend on a few key factors: the breadth of their asset offerings, the effectiveness of portfolio allocation; and their technological prowess in data collection, algorithms, machine learning.
Although robo-advisory in China is still in its infancy, this is a positive trend. As more and more players enter the market, their investment in investor education is good for China's wealth management industry in general.