17 April 2018

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The issuance of robo-advisory licences by the Securities Commission Malaysia (SC) would allow regulators to provide high quality and cheaper investment advice for customers.

Main Street Capital Sdn Bhd CEO Julian Ng said through a robo-advisory licence, regulators are able to reach out to wider ranges of investors where previously only wealthy clients could afford the investment advice.

Robo-advisors are digital platforms that provide automated, algorithm-driven financial planning services with little to no human supervision at lower cost.

“At the same time, it will force incumbent players to rethink what it means to invest in the same way AirAsia Bhd had forced Malaysia Airlines Bhd, and how Airbnb forced hotels to rethink travel,” he told The Malaysian Reserve (TMR).

Last year, the SC had issued the Digital Investment Management (DIM) guidelines to encourage innovative digital solutions for investment management.

TMR has also reported that the SC will be licensing the first digital investment manager, also known as robo-advisory this year.

This is in line with its digital markets strategy, SC chairman Tan Sri Ranjit Ajit Singh (picture) said, adding that significant interest has been registered for robo-advisors.

“The SC has been quite forward looking in the digital space after DIM was added to equity crowdfunding and peer-to-peer lending over the last two years.

“I believe this will enlarge investors’ choice and at the same time keep up with the global online scene for capital markets,” Ng said, adding it would be good for incumbents got into robo-advisory licence as it would provide an added value to the company and benefit customers.

However, it would mean incumbents would have to dismantle or compete against their own high-cost agency and investment structures.

“But, affordable policies with adequate coverage are what people need,” Ng said.

He added that the unit trust industry would also understandably guard their interests, but at the end of the day, this is about a proposition to the man on the street, not powerful interests.

“Anyhow, I think that the market will be big enough for robo-advisory and traditional players to co-exist. If they come up with good low-cost index funds, it might even invest in them,” he said.

Source: The Malaysian Reserve (