By ASILA JALIL / Pic By MUHD AMIN NAHARUL
ASSET and wealth management companies need to embrace digital applications to attract millennials as they are more tech-savvy and willing to invest via digital platforms with assistance from robo advisory.
International Centre for Education in Islamic Finance (Inceif) president and CEO Prof Datuk Dr Mohd Azmi Omar said individuals between the ages of 25 and 40 are keen on investing, but very few platforms are equipped with robo advisory.
He said robo advisory creates an opportunity for asset managers to target the mass affluent who are looking for cheaper alternatives to obtain advice on ways to manage their assets.
“Digital application is becoming the norm, and asset and wealth management companies have to embrace it, as we can see in the context of banking which is moving ahead much faster than these companies.
“Asset and wealth management companies can either develop their in-house robo advisory application or work with companies that provide those services.
“Demand for digital application will continue to increase and if these companies do not adjust and adapt, they will be left behind,” he said in a Malaysian Financial Planning Council webinar on Shariah wealth management and financial planning yesterday.
An Inceif survey showed 67% out of 211 respondents said they have excess money to invest, while 38% are somewhat familiar with investment.
Of the total respondents, 78% individuals came from the bottom 40% (B40) income group, while 22% were from the middle 40% (M40) income group.
Millennials made up 84% of the total respondents, while Generation X and baby boomers made up 12% and 4% of the respondents respectively.
A total of 118 respondents have invested in unit trust, while 69 respondents have never made any investments. Stock market investment is also popular with 50 respondents saying they have dived into the market.
Mohd Azmi highlighted that although 77% of the respondents said they would invest via a platform that does it on their behalf, only 38% were aware of robo advisors.
“We can see that individuals, particularly millennials aged between 25 and 40, are more digital literate. Wealth and asset management companies need to work with robo advisory firms to target these young millennials,” he said.
Mohd Azmi said increasing the adoption of robo advisory, however, does not necessarily reduce the services of individual investment agents.
High-net-worth individuals may still prefer independent agents as they require more personalised services to cater to their financial investment needs, which robo advisory may lack in terms of providing a comprehensive range of services.
Mohd Azmi said the role of digital applications plays more prominent roles for the M40 and B40 income groups mainly because individualised services are expensive.
“Bespoke investment advisors would be required for high-net-worth individuals or those who are considered in the top 20% income group. These individuals would require more personalised services, so (lies) the importance of agents.
“Robo advisory is less expensive because it is all done through digital means. We need to segmentise the market and target the individuals differently,” he said.