Wealthtech developments from 2017 to 2021* by Endowus and KPMG have revealed Singapore’s mettle when it comes to capturing Asia’s growing wealth. Local wealthtech venture funding hit more than US$161 million in 2021, representing a sevenfold increase from US$23 million in 2017. This surge drastically outpaced the corresponding threefold increase seen globally (from US$2.63 billion to US$8.8 billion) and Asia’s twofold increase (from US$1.1 billion to US$2.2 billion) in the same period.
The Endowus-KPMG WealthTech: Looking Ahead report also noted that the key to the growth of wealthtech funding in Singapore was the rise of prominent wealthtech players providing online investing tools and digital advisory capabilities. This upward trend occurred in response to a rapidly-growing pool of high net worth individuals (HNWI) and ultra-high net worth individuals (UHNWI), which rose by 126% and 158% respectively between 2016 and 2021.
Driven by a perceived outlook of increased political stability, Singapore is also seeing further inflow of wealth from other leading Asian hubs and is the third-largest wealth centre globally, having amassed over US$1.5 trillion in cross-border wealth in 2021.
Anton Ruddenklau, Partner & Global Head of Fintech at KPMG International said, “Wealthtech is relatively young in Singapore, with key players in the space sprouting up in the mid to late 2010s. Through combining contemporary technologies with a digital-first experience, they have brought new models that embed wealth management into daily lifestyles and empowered the average layperson that traditional wealth management had mostly left out.
"Aligned with this is a generational shift in consumer behaviour, where the Gen Z demographic are truly digitally native and concerned about their current and future well-being. Wealthtech firms that are able to scale services and products to address the mass affluent while creating a secure, intuitive and customised experience will be the frontrunners in redefining the future of wealth management.”
Samuel Rhee, Chairman and Chief Investment Officer of Endowus said, “While uncertainties may remain given the current macroeconomic conditions, we anticipate massive growth opportunities for the wealthtech sector. There is a unique opportunity for wealthtech players to transform and reform the current state of the wealth management industry to improve outcomes for all clients regardless of demographics and wealth levels.
"Technology can enable and accelerate great improvement in advice, access and cost - the three pillars of success in building long term wealth. Greater transparency, alignment and personalisation of wealth services are needed to meet the increasingly sophisticated demands of investors. I foresee greater excitement around new and emerging wealthtech players as they penetrate deeper into services and client segments that previously had little or no digital adoption.”
Venture funding to wealthtechs headquartered in Asia grew to over US$2.2 billion in 2021, constituting a quarter of total global wealthtech venture funding. The region is forecast to overtake Europe as the world’s second-largest wealth hub by 2026, with both HNWI and UHNWI populations expected to grow at the quickest pace compared across all regions.
With its political stability, tax incentives and a supportive regulatory environment, Singapore has positioned itself as a key wealth management hub both regionally and globally. Along with a promising outlook on wealth management, Singapore also has a well-established IT infrastructure in place and the general population is tech-savvy and attuned to digital applications as part of their lifestyles.
Singapore’s readiness as an innovation and financial hub is nowhere more apparent than during the COVID-19 driven fintech funding boom in 2020 and 2021. Early-stage and late-stage average venture deal sizes in Singapore each surged to a record high of over US$15 million in 2021, indicating boosted investor confidence in the Singapore wealthtech venture ecosystem. This increase in average early-stage deal size was partly attributed to US$44 million raised across two venture rounds by Endowus, a digital wealth platform in Singapore.
High rates of internet penetration in Asia, especially in Singapore, further led to an increase in the adoption of digital financial services. This has made wealth management products accessible to the large and growing middle-class population at lower costs. In an Endowus Wealth Insights report** which captured the responses of 680 Singapore respondents, it was noted that digital investment platforms are popular among respondents, with 90% of them currently using digital wealth platforms and robo-advisors, and 74% of them currently using online brokerages. In contrast, only one in five respondents are tapping the services of traditional financial advisors, while one in four noted that they are using the investment services offered by banking institutions and traditional brokerages.
With a preference for investing digitally, this new generation of investors also has greater access to information, driving them to desire not only more sophisticated products, but also greater control over their investment portfolio. Clients with relatively smaller investment capital, which had not been considered highly important by wealth managers, now collectively form a key potential market.
The challenge in serving this segment lies with effectively scaling investment offerings at mass, balancing low costs to remain competitive whilst retaining a high-level of service levels and diversity in products expected by these investors. Additionally, these clients are expecting greater pricing transparency. For a long time, pricing approaches in wealth management firms have remained obscure. Some robo-advisors have directly addressed the issue of the lack of transparency by charging investors an “all-in” access fee, which is typically a percentage of the total value of their assets managed by the platform. Increasingly, investors are empowered with the knowledge of how much and what they are paying for.
Digital assets, such as cryptocurrencies and non-fungible tokens (NFTs), also continue to be an asset class with strong consumer interest among both institutional and retail investors. The report showed that 91% of respondents in a survey conducted in June 2022 indicated an intention to purchase crypto in 2H22.
.png "Source: Endowus. Singapore leads in wealthtech funding globally.") |
| Source: Endowus. Singapore leads in wealthtech funding globally. |
Despite market volatility and the onset of the crypto winter - tumbling prices and reduced interest in the crypto market - wealth managers are cautiously expanding their offering of digital assets to anticipate forward demand. To safeguard consumer interest and build investor confidence in the digital assets industry, regulators have also commenced on building regulatory frameworks around digital assets, particularly crypto activities, to ensure that these activities are conducted in a safe and secure manner.
Other report highlights include:
- Digitalisation will continue to increasingly shape investor independence and autonomy, as it empowers the ‘man on the street’ with the required investment tools.
- Free access to information will subvert the role of the traditional advisor, as investors place less reliance on paid advice given greater financial literacy and changing lifestyle preferences.
- The ability to effectively leverage artificial intelligence (AI) and data analytics in delivering personalised insights and recommendations based on individual needs and preferences will be a key differentiator for wealth managers in capturing market share moving ahead.
- Tokenisation - the creation of Blockchain-based tokens which can be exchanged for other goods and services - will become widely adopted to offer niche products to retail investors.
- Privacy and cyber-security concerns will become an increasingly important factor in choosing between wealth managers; building trust by addressing these concerns will be vital.
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*Only full year data were taken into consideration. Hence, year 2022 data has been excluded from this report.
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