Robo-advisors offer low-cost growth opportunities, says GlobalData

Nomura Asset Management, a wholly owned subsidiary of Japan-based Nomura Holdings, has recently agreed to buy majority stake in Tokyo-based robo-advisory services provider 8 Securities Inc and a minority stake in Hong Kong headquartered parent company 8 Limited for JPY2.7bn ($25m). Expect major international asset managers to build similar distribution channels via the purchase of other established robo-advice FinTechs, says leading data and analytics company GlobalData.

Compared to most robo-advisers, 8 Securities has been in the market for a while. Chloe, its robo-advice platform, was the first in Asia to be offered via a mobile app and it currently has a presence in Hong Kong and Japan.

The investment reflects the promising growth and potential of robo-advisory services in Asia including Japan, and marks one of Asia’s largest FinTech capital injections in 2018.

Andrew Haslip, Head of Financial Services Content for Asia Pacific at GlobalData, says: “For investment managers looking to cost-effectively develop their own distribution channels without disrupting existing relationships, robo-advisors offer a great option.

“They can draw in new, younger clients that want purely digital solutions without cannibalizing the established business of older investors. Other large-scale asset managers will need to make similar investments in proven robo-advisors if they want to compete for the next generation of investors.”

A partnership with major international brand such as Nomura will allow 8 Securities Group to   expand into new geographies and gain enough business volume, a difficult task for all start-up robo-advisors. Nomura Asset Management operates in 14 markets and had assets under management of $473bn at the end of 2017, a fraction of which would be enough to generate the scale necessary for 8 Securities’ Chloe to become economical.

For Nomura volume and economies of scale are obviously not an issue, but remaining competitive among younger consumers is. As per the company’s 2017 Mass Affluent Investors Survey, although only 1% of investors use robo-advisors as their main investment channel, in total roughly 27% of millennial investors have used one.

Haslip adds: “By buying into a proven platform that works in Asia, Nomura is explicitly targeting millennial investors, as the investment gives the company a digital distribution channel to reach out to this demographic.”

With Millennials fast becoming the economically dominant age cohort in many key markets, reaching out to them effectively has risen in investment managers’ priorities. Keep alert for the next robo-adviser acquisition as this will not be the last.