What is a robo advisor and why Endowus is different

Choice is meaningful. It acknowledges the uniqueness of each individual and respects their different needs throughout various phases of life. The multitude of options can often leave us paralysed with indecision, especially when it comes to managing wealth and choosing between the many digital wealth management platforms. 

Although these platforms may seem similar at first glance, they actually vary significantly in terms of investment offerings, costs, fees, team expertise, and underlying investment philosophies. While media and blogs often categorise Endowus as a robo-advisor due to our simplified investment process and digitally delivered advice, different platforms can produce vastly different outcomes for their clients as a result of their unique approaches.

Read more: Why investing in Hong Kong shouldn’t be expensive

What are robo-advisors?

A robo-advisor is a digital platform that uses algorithms to provide automated investment advice and manage portfolios. These platforms analyse market trends and make recommendations based on a client’s risk tolerance and goals, typically offering options like index funds and ETFs.

Unlike traditional advisors, robo-advisors operate 24/7 and often have lower fees, making them ideal for investors who prefer a passive role or cannot afford ongoing personal monitoring.

Why is robo-investing attractive?

Robo-advisors have gained significant traction globally, and Hong Kong is no exception. Data shows that the city’s robo-advisory market is anticipated to reach US$2.67 billion under management in 2024 and to grow at an annual rate of 8% through 2028. Here are three key reasons why robo-advisors can appeal to Hong Kong investors:

1. Cost-efficiency

Fees can eat into investment returns. Robo advisors typically offer services at a low cost due to their automated nature. This cost efficiency makes investing more accessible and allows investors to keep more of their returns.

2. Accessibility and convenience

Robo-advisors provide a user-friendly, 24/7 platform for investors to manage portfolios remotely, ideal for the city’s busy professionals lacking time for regular financial advisor meetings.

3. Effective data accessibility

Home bias, a tendency for investors to over-invest in domestic markets, is prevalent among local investors. Robo-advisors leverage algorithms that extract numerous data to create diversified portfolios that spread risk across asset classes and geographies, an effective way to mitigate risks and capture global growth opportunities. 

Strategy and approach vary from one robo-advisor to another. Investors should carefully assess the investment strategy and approach of different platforms to ensure compatibility with their risk tolerance, financial status, and investment goals.

Endowus is NOT a robo advisor for 3 reasons

Active versus passive investment approach

Robo-advisors often use an active and tactical asset allocation strategy, making opportunistic bets on specific sectors or regions. While this may seem like a rational approach, this requires repeatedly outguessing the market to succeed, and is tremendously daunting to generate positive returns consistently. 

Frequent portfolio changes and active return chasing are common among many investors, and those in Hong Kong and Singapore are no exception. Our report reveals that 28% of respondents reported that their investment objective is to achieve short-term capital gains from market fluctuations. And, nearly half of the respondents make portfolio changes at least once every three months.

At Endowus, we take a different approach. Our core belief is that time in the market is more crucial than timing the market. We prioritise long-term investing over trying to time the market. This philosophy is grounded in decades of empirical research, showing that while profits may fluctuate during business cycles, markets consistently emerge stronger as businesses innovate and increase productivity. 

Our Strategic Passive Asset Allocation approach

Endowus employs an evidence-based approach, combining strategic passive asset allocation and global diversification through best-in-class funds at a low cost for a long-term investing philosophy. The Strategic Passive Asset Allocation (SPAA) framework is:

• Strategic top-down: Allocation to asset classes is based on the portfolio's goal.
• Passive implementation: No tactical changes based on market conditions.
• Curation of portfolio design bottom-up: Selecting best-in-class funds to represent the SPAA, accessing leading global fund managers.

Endowus avoids market timing, emphasising that time in the market is more important than timing the market. The Flagship Portfolios are designed to provide broad exposure to global markets. The broad-based diversification through SPAA reduces the risk of blow-ups due to any single sector or geography. 

Positioned with highly diversified funds, the size of each position is relatively small in a portfolio comprising over ten thousand stocks and bonds, which gives investors greater peace of mind and probability of success. 

As such, the process can avoid major blow-ups, leading to opportunities to make back the money you lose from market cycles and can compound your returns over a longer period of time. 

Read more: The power of diversification in investing

Real advisors, real support

Endowus not only offers a unique investment philosophy but also provides personalised client services. 

Our SFC-licensed client advisors are available for in-person consultations. This personal touch provides clients with peace of mind, ensuring that their investment needs and concerns are addressed directly by qualified and conflict-free professionals.

Client advisors help bridge the gap between digital convenience and personalised financial advice, making Endowus a hybrid solution that combines the best of both worlds. This approach is vital because the true value of advisors lies not just in the functional aspects of providing investment products and services, but also in the psychological and emotional guidance and behavioural coaching they offer. Clients can discuss their financial goals, risk tolerance, and investment strategies in detail, gaining confidence in their investment decisions.

Lowering costs: The easiest way to improve returns

Mutual fund research company Morningstar calls fund fees the best predictor of returns. Left unchecked, a seemingly small cost of an extra 1% per year will compound into hundreds of per cent in lost returns in a few decades. 

As the leading and largest independent digital wealth platform in Singapore, we pride ourselves in not only lowering costs at every layer possible, but also continuing to innovate on solutions, products, and services. In trying to serve our clients better and drive positive change in the industry, we have introduced:

• We offer 100% cashback on trailer fees, significantly reducing costs compared to the industry average.
• We provide access to institutional share classes of funds, previously unavailable to retail investors, with a minimum investment starting from just HK$10,000.

Read more: Why invest through Endowus

Start your investment with Endowus

By persistently pursuing the highest standards from the fund managers with whom we partner, by demanding institutional share class fees and returning 100% cashback on all trailer fees to our clients, and by introducing the lowest cost option to access high-quality investment solutions, we are committed to improving your investment experience and outcomes. 

We want the industry to follow suit to help everyone invest better today, so they can live better tomorrow.

Start your investment voyage with Endowus today.

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Risk Warnings

Investment involves risk. Past performance is not an indicator nor a guarantee of future performance or returns. Projected performance or returns is not guaranteed to materialise. The value of investments and the income from them can go down as well as up, and you may not get the full amount you invested. Rates of exchange may cause the value of investments to go up or down. Individual stock performance does not represent the return of a fund. 

Risk related to discretionary management . As Flagship Portfolios are provided under discretionary services, Endowus will manage the assets under the portfolio subject to compliance with the terms and conditions of the DPM Services Agreement and on a fully discretionary basis; you will not have any role or right to make investment decisions, except for making contributions or withdrawals from the portfolio; it would not be mandatory for Endowus to provide the underlying fund prospectuses or other fund information to you for each and every investment decision made on behalf of you.  You should exercise caution before investing in discretionary managed portfolios. 

Flagship Portfolio may contain professional-investors only fund(s) and/or “Complex Product”.  In general, Professional-investors only funds are funds that have not been authorised, nor have the offering documents been reviewed by the SFC.  “Complex Products” (as defined by the Securities and Futures Commission, the “SFC”) refer to investment products (e.g. funds) whose terms, features and risks are not reasonably likely to be understood by retail investors because of their complex structures.  Professional-investor only funds and Complex Product in general may have higher risk than other retail and non-complex products.  Past performance is not indicative of future performance. All investments involve risks (including the possibility of loss of the capital invested) and the price of fund units may go up as well as down. This fund may invest in financial derivatives which may involve additional risks (e.g. market, counterparty, liquidity, leverage and volatility risks) and lead to higher volatility. In adverse situations, the fund may suffer significant losses. This fund is not principal protected. In the worst-case scenario, you may lose the entire invested amount. Do not invest in a complex product unless you understand and are willing to assume the risks associated with it, including (in some cases) the risk that you may lose more than the invested amount. Please refer to the “Important Information About Funds” for details of the risks involved.  If you are in any doubt, you should clarify with us or seek independent professional advice.

General risk warnings relating to collective investment schemes 

Before making an investment decision, you are reminded to refer to the relevant prospectus/ offering document for specific risk considerations and related fees and charges. Funds are not a bank deposit and not capital guaranteed, and is subject to investment risks, including the possible loss of the principal amount invested. Some of the funds also involve derivatives. Do not invest in them unless you fully understand and are willing to assume the risks associated with them.

Opinions

Whilst Endowus HK Limited (“Endowus”) has tried to provide accurate and timely information, there may be inadvertent delays, omissions, technical or factual inaccuracies or typographical errors.  Any forward-looking statements, prediction, projection or forecast on the economy, stock market, bond market or economic trends of the markets contained in this material are subject to market influences and contingent upon matters outside the control of Endowus HK Limited (“Endowus”) and therefore may not be realised in the future. Further, any opinion or estimate is made on a general basis and subject to change without notice. In presenting the information above, none of Endowus HK Limited, its affiliates, directors, employees, representatives or agents have given any consideration to, nor have made any investigation of the objective, financial situation or particular need of any user, reader, any specific person or group of persons. Therefore, no representation is made as to the completeness and adequacy of the information to make an informed decision. You should carefully consider whether any investment views and products/ services are appropriate in view of your investment experience, objectives, financial resources and relevant circumstances. You may also wish to seek financial advice through a financial advisor or the Endowus platform and independent legal, accounting, regulatory or tax advice, as appropriate.

No invitation or solicitation

Nothing contained in this article should be construed as a solicitation, an offer to buy or sale, or recommendation, to acquire or dispose of any security, commodity, investment or to engage in any other transaction in any jurisdiction in which such solicitation, offer to buy or sale would be unlawful under the securities laws in such jurisdiction. No information included in this article is to be construed as investment advice or as a recommendation or a representation about the suitability or appropriateness of any advisory product or service; or an offer to buy or sell, or the solicitation of an offer to buy or sell, any security, financial product, or instrument; or to participate in any particular trading strategy. Investors should seek independent financial and tax advice before making any investment decision.

Product Risk Rating: Please note that any product risk rating (the “PRR”) provided by us is an internal rating assigned based on our product risk assessment model, and is for your reference only. The PRR is subject to change from time to time. The PRR does not take into account your individual circumstances, objectives or needs and should not be regarded as advice or recommendation to purchase, hold or sell any fund or make any other investment decisions. Accordingly, you should not solely rely on the PRR in making your investment decision in the relevant Fund.

This article has not been reviewed by the Securities and Futures Commission or any regulatory authority in Hong Kong.