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Singapore eyes regulatory changes to help growth of robo-advisors for investors

SINGAPORE (Nikkei Markets) -- Singapore may make it easier for digital, or "robo-advisory" firms to manage funds on behalf of retail investors by waiving some minimum requirements, as the city-state steps up efforts to woo financial technology firms keen on expanding their operations in Asia.

Such robo-advisors provide investment advice using automated, algorithm-based tools. While digital advisory tools are used by financial professionals to service their clients, there are some that clients can use directly with limited or no human interaction.

Allowing robo-advisors to combine advisory and fund management will give them greater flexibility to develop new services.

The Monetary Authority of Singapore believes robo-advisors will promote innovation in financial advisory services and improve consumers' access to low-cost investment advice.

In a consultation paper released Wednesday, the MAS proposed waiving the minimum five-year track record that applies to traditional fund managers. The MAS is also considering exempting such firms from having assets under management of at least 1 billion Singapore dollars ($724 million).

MAS said the waiver would be subject to several safeguards, including scrutiny of key managers to ensure they are sufficiently experienced in fund management and technology. At least 80% of recommended portfolios should be in traditional exchange-traded funds that are less risky due to their diverse holdings and robo-advisors that are licensed must undertake an independent audit of their business within a year of operation.

Singapore is widely regarded as a major hub for financial technology, helped by government support for the industry. MAS, for instance, allows financial institutions and start-ups to test new products and services under its regulatory "sandbox" scheme aimed at encouraging experimentation, even if the proposed offerings do not clearly comply with existing legal requirements.

Last year, Deloitte named Singapore and London as the world's top two centers for fintech.

Michele Ferrario, co-founder and CEO of robo-advisory firm StashAway, said MAS's proposal to waive the five-year track record requirement and focus instead on the founders' experience would help start-ups roll out their technology more quickly and efficiently.

He also said subjecting robo-advisors to the same regulatory framework as fund managers, albeit with some concessions, was an important step as it signals that these new players are able to offer the same services as established fund managers.

"We may not have a track record but my co-founder and the team have gone through several financial cycles," he said, referring to chief investment officer Freddy Lim who was formerly global head of derivatives strategy at Nomura.

StashAway received in-principle approval from MAS in April to provide retail fund management services.

Oversea-Chinese Banking Corp, Singapore's second-largest lender, believes the MAS's proposals will help accelerate the shift towards automated wealth advisory services.

Aditya Gupta, OCBC's head of e-business for Singapore, said: "It was another step towards the 'democratisation' of wealth management - making wealth management simpler and more accessible for investors."

In March, OCBC partnered a Singapore fintech firm to pilot a robo-advisory service for investors that uses an automated, algorithm-based portfolio management service to provide advice and help investors rebalance their investment portfolios at regular intervals.

--Kevin Lim

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