AIMS Financial Group, a Sydney-based financial services and investment group, is looking to add a robo-advisory service on a white-label basis.
The move marks a trend among smaller financial companies in Australia to find cost-effective technologies to grow revenues.
Sangeeta Venkatesan, chief operating officer at AIMS, told DigFin that she has seen the number of robo-advisory companies in Australia take off in the past year.
This has led to new possibilities for AIMS to add additional products at low cost, and to generate revenue by charging the robo-advisor a fee for directing investor trades its way. It is also a way for the brokerage to respond to a shift in client preferences away from trading equities toward wealth-management products, such as mutual funds.
“It would be an off-the-shelf solution for our broking platform,” she said. Venkatesan joined the firm in late 2016 after running Commonwealth Bank of Australia’s renminbi trade finance strategy.
More for Asian clients
AIMS is a small but diversified firm in Australia that differentiates itself by serving Chinese and other Asian clients with access to Australian capital markets and investments. For example it is a strategic shareholder in Sydney Stock Exchange, and in 2008 it acquired 100% of Asia Pacific Stock Exchange (APX), a licensed Sydney-based exchange that competes to list Asia-based companies.
It has also introduced A$1 billion of international, mainly Asian, investments into Australia, including into the firm’s line of real-estate investment trusts. AIMS manages about A$2 billion of assets.
Venkatesan said the attraction of white-labelling a robo-advisory service was it could enable AIMS to offer its Asian clients other Australian investment products, so the company didn’t have to build these itself.
“If we were to create this [robo-advisory service] ourselves, it would require us to build an entirely new funds business,” she said. “We’d have to invest a lot in compliance and risk management, and assume all the risk.”
Robo-advisors land in Oz
Alex Vynokur, managing director at BetaShares, a Sydney company that manages exchange-traded funds and invests in fintech startups, said robo-advisors had entered the Australian market in the past year.
“Their traction has been limited so far,” he said. “They’re still at the proof-of-concept stage.” Although they are not well funded today, he said many independent financial companies, such as AIMS, are looking to add robo solutions, as are the big banks.
For AIMS, finding a robo-advisor is only part of its search to increase revenues. Venkatesan is still examining a variety of providers to understand their product, the nature of AIMS’ potential exposures, and what kind of regulatory approvals, credit risk or compliance requirements a white-label arrangement would entail.
She also needs to determine the marketing costs of getting a solution out to the market quickly.
AIMS wants to add Australian products that complement its Reits for Asian and local investors. If the project is a success, it could later add international products.
However, the robo project is only one part of AIMS’ drive to grow revenues. It is ultimately a secondary-market offering, and AIMS wins Asian and local clients through originating primary-market deals. That’s what it needs to maintain its competitive edge against much bigger players. The brokerage business feeds off of that, as does asset management.
Therefore Venkatesan is also hiring investment bankers.
“There’s not a technology angle to that,” she said. Robo-advisory is therefore an adjunct to old-fashioned rainmaking.
