Artificial intelligence

Hong Kong ‘falling behind’ in race to build up automated financial adviser platforms

Legg Mason’s China chief says the city’s brokers need to be able to a develop comprehensive view of investors’ portfolios to be able to catch up with China and the US in so-called robo-advisory services

PUBLISHED : Monday, 25 September, 2017, 5:25pm
UPDATED : Monday, 25 September, 2017, 5:25pm

Operators of automated, algorithm-driven financial planning services, or so-called robo-advisers, in Hong Kong need to significantly step up their game if they are to compete with Chinese and US institutions, according to Freeman Tsang, head of China and Hong Kong for asset management firm Legg Mason.

Only a few securities brokerages have entered Hong Kong’s robo-advisory market, which unlike the one in the US, lacks an open, computer interface that allows access to investors’ portfolios across different companies to develop an overall view of their financial status.

Such a foundation is vital for robo-advisers to be able to offer more customisable financial advice and support transactions across different investment tools and firms.

“It is not enough to have a model of providing basic asset allocation services to investors in Hong Kong, China or in Asia,” Tsang said. “They need information to look across all their investment portfolios.”

China is leading the way in robo-advisory services after jumping from a cash-based society directly to online payments, whereas in Hong Kong, investors still have concerns over the security of online payments, Tsang said.

New players in Hong Kong also need to seek clearer guidance regarding licensing requirements and services to ensure the accountability and compliance of AI-driven investment decisions, compared to China where regulation has been relatively more supportive, he said.

In July last year, Legg Mason, which manages about US$720 billion of assets globally, ventured into automated financial planning when it acquired an 82 per cent stake in US-based robo-adviser Financial Guard. Financial Guard specialises in the consolidation of retirement funds of US clients, who typically own six or seven 401K pension accounts.

Separately, Legg Mason said that Chen Tianqiao, chairman and CEO of Chinese investment firm Shanda Group, and Robert Chiu, Shanda’s president, had joined Legg Mason’s board of directors after Shanda increased its stake in Legg Mason to 15 per cent.

“There are potential disruptions within the asset management industry. Shanda’s involvement will help us navigate and become more forward-looking in terms of opportunities to leverage on digital platforms,” said Tatyana Klauzner, Asia head of corporate communications at Legg Mason.