What does Endowus Hong Kong represent to investors?

We’re delighted to have you come on board with Endowus Hong Kong. As Head of Hong Kong, I’m excited to have Endowus as your essential partner for wealth management and retirement planning  in Hong Kong. 

Endowus has launched in Hong Kong because we see a problem. In every demographic mix from private banks to retail banks, people struggle to invest their money. The reasons?

• High costs
• Lack of aligned advice
• Lack of access to products

This leads to poor outcomes, and has caused one of the biggest generational challenges and opportunities of our time: wealth accumulation and retirement. 

Hong Kong is also one of the fastest growing offshore wealth hubs, poised to overtake Switzerland by 2023. Yet, Asia’s wealth and investing experience is broken — and Endowus wants to fix it. 

Say no to high costs, and yes to conflict-free investment advice

Hong Kong’s investing costs are one of the highest in the world. Equity mutual fund fees are 2.9 times more expensive than that of the United States, while that of fixed income mutual funds fees are 3.1 times of fees in the United States. 

‍

HK and Singapore are among the most expensive markets¹

Morningstar’s fees scorecard of major countries as of 30 March 2022

Markets such as the United States and other countries such as Australia, United Kingdom and the EU nations have lower median expense ratios, because any trailer-fee payment arranged between fund managers and distributors has been made illegal through regulation such as the Retail Distribution Review (RDR) in the United Kingdom and MiFID II (Markets in Financial Instruments Directive) in Europe. 

The trailer fee is the recurring fee paid to fund distributors, such as fund platforms and banks. 

RDR and MiFID II were put in place to address a conflict of interest created from trailer fees. The practice of earning trailer fees leads to significant misalignment between the distributors and ordinary investors. Distributors are incentivised to push the products offering the highest trailer fees to the clients, when in reality, investors would benefit from lower cost products with zero or low trailer fees. 

Endowus has run calculations to demonstrate the impact of trailer fees — it represents a looming opportunity cost for investors that has been kept hidden from view. If investors had invested between 1988 and 2021 and put that trailer fee to work in the markets instead of paying it to fund distributors, they would have earned another 290%. So $12,000 in 1998 should have snowballed to more than $100,000 by 2021 (or 780% in total returns). 

Unit-trust investors are also typically charged a one-time fee when buying a fund. This sales charge is known as a front-end load. What contributes to the expensive investing options in Hong Kong is that fund distributors continue to charge upfront sales charges.

Tackling the high costs of investing is one big reason why Endowus came into being.  It is possible for advisors and fund distributors to offer lower cost funds and to open up access to low-cost funds so that retail investors can enjoy a higher chance of success in building long-term wealth. 

We were the first in Singapore to rebate trailer fees — and we will bring the same practice to Hong Kong. Endowus wants to move towards global standards in lowering investing expenses, by charging fair and transparent fees to stay aligned to retail customers’ interests. 

Strong investment research process to screen tracker funds, unit trusts, alternative investments in Hong Kong

The mission of the Endowus Investment Office (IO) is to unlock institutional-quality research, investment products, and portfolios that were previously only available to private banks, and to provide the same experience to all our clients. Endowus is driven by the belief that everyone deserves to invest well to prepare for their best life. 

IO is made up of about a dozen investment professionals, including our Chairman and Chief Investment Officer (CIO), Samuel Rhee. We have over 92 years of total industry experience, spanning across equity research, portfolio management, and investment research.

Read more: Get to know the core Endowus HK team

Endowus takes a unique path in curating best-in-class funds as building blocks for all portfolios. We select these funds by implementing a strict, institutional-grade screening process that is rigorous, thorough, and continuous — we call this framework SMART+.

After we have identified the list of best-in-class funds, IO uses a portfolio construction framework developed by the team, incorporating these key elements:

• Diversification
• Risk assessment
• Return optimisation
• Cost optimisation

The work doesn’t stop after the portfolios have been constructed — we actively track the performance of the funds. 

These forms of monitoring and engagement by IO come on top of the the different layers of monitoring for the investment products that are already executed on a regular basis:

• Monthly — Every fund on the Fund Smart platform is monitored to make sure that thresholds for risk and return are still being met. Every fund is put on the Fund Smart platform with certain performance expectations, and the team is tasked with making sure those expectations continue to be met within certain thresholds.
• Quarterly — Even with the monthly monitoring for every fund, we believe it is important to ensure that the advised portfolios continue to have the best of our ideas packaged into them. We analyse the sector allocations, country allocations, factor exposures, and tilts of each portfolio to ensure diversification is maintained on all fronts. We review the available funds in each asset class to make sure we continue to allocate to the most appropriate funds for each portfolio.
• Annually — We keep an open dialogue with our fund management partners to make sure we are kept abreast of all the important developments in their organisations and changes in the funds that we have on the platform. We conduct due-diligence calls at least once a year to make sure the funds are being managed in a consistent manner.

Endowus — a trailblazer with CPF investing in Singapore and now your retirement planning partner with Hong Kong’s MPF

In Singapore, Endowus has made public pension investing (CPF investing) better for everyone by digitalising the experience and lowering costs to a fraction — from over 5% p.a. to 1% p.a. all-in. We were also the first to bring low cost passive index funds to public pension investing in Singapore. 

Our pension savings should be worked harder for our retirement and to beat inflation. 

Retirement inadequacy is a critical issue facing Hong Kong today, with its high life expectancy and the population expected to become the most aged in the world by 2050 according to the UN's prediction. Despite the existence of the Mandatory Provident Funds scheme (MPF) for over 22 years, retirement planning and adequacy still remains top of mind as one of the key investment goals for Hong Kong investors as revealed in Fidelity’s Global Sentiment Survey 2022. 

This is where Endowus steps in — solving the generational challenge of retirement inadequacy is one of our core missions. We believe in financial education and literacy, especially in the area of retirement planning, and are committed to providing professional, independent advice alongside comprehensive and thoughtful content to help Hong Kongers navigate this complex landscape.

Get started with Endowus Hong Kong today

Endowus is the first truly independent, conflict-free, open-architecture fee-only wealth management platform in Asia, where end-clients can directly access best-in-class investment strategies and advice at institutional-grade cost. This brings you cost savings, product access, and an advisory process to systematically reach your wealth goals.
We are here to bring change to the industry, so that we can all invest better, to live better. Keen to join us on this journey? Get started with Endowus HK here.

‍

<divider><divider>

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.

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

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