SC in­tro­duces plat­form that of­fers au­to­mated and al­go­rithm-driven fi­nan­cial plan­ning ser­vices

New Straits Times - - Business - LOKMAN MAN­SOR KUALA LUMPUR bt@me­di­aprima.com.my

MALAYSIA’S cap­i­tal mar­ket will soon have a new mode of in­vest­ment that is more con­ve­nient, af­ford­able and ac­ces­si­ble.

The Se­cu­ri­ties Com­mis­sion Malaysia (SC) yes­ter­day in­tro­duced the frame­work for Dig­i­tal In­vest­ment Man­age­ment, com­monly re­ferred to as robo-ad­vis­ers.

These are dig­i­tal plat­forms that of­fer au­to­mated, al­go­rith­m­driven fi­nan­cial plan­ning ser­vices.

In prac­tice, the plat­form col­lects data from clients about their fi­nan­cial sit­u­a­tion and fu­ture goals, and then uses the in­for­ma­tion to of­fer ad­vice and/or au­to­mat­i­cally in­vest the clients’ funds.

At a tech­ni­cal brief­ing, the SC said the new plat­form would be an at­trac­tive en­try-level op­tion for new in­vestors with small ac­counts and lim­ited in­vest­ment ex­pe­ri­ence.

“This is about en­larg­ing the pie, and get­ting more in­vestor par­tic­i­pa­tion.”

In the United States, where robo-ad­vi­sory ser­vices was in­tro­duced in 2008, as­sets un­der man­age­ment hit US$60 bil­lion (RM bil­lion) as at end 2015, and is pro­jected to reach US$2 tril­lion by 2020.

The SC said the new in­vest­ment chan­nel is con­ve­nient and ac­ces­si­ble as clients can ac­cess the plat­form on var­i­ous de­vices, and at any­time of the day. Trades can be done af­ter a few clicks with min­i­mal pa­per­work.

“And be­cause much of the process is au­to­mated, the cost struc­ture is lower, which should re­sult in lower fees for the clients,” the SC added.

The reg­u­la­tor has con­ducted en­gage­ment with the fund man­age­ment in­dus­try since last year, and ex­pects a mix­ture of new en­trants and in­cum­bents to ap­ply for li­cences to of­fer these new ser­vices.

This in­cludes re­gional play­ers from Sin­ga­pore, Hong Kong and Aus­tralia who are al­ready of­fer­ing robo-ad­vi­sory ser­vices in their own mar­kets, the SC added.

The SC’s frame­work sets out the li­cens­ing and con­duct re­quire­ments for the of­fer­ing of au­to­mated port­fo­lio man­age­ment ser­vices to in­vestors.

“To re­in­force in­vestor pro­tec­tion, spe­cific con­duct re­quire­ments that com­men­su­rate with the dis­tinc­tive char­ac­ter­is­tics of this new busi­ness model have been set out,” said the SC.

This in­cludes the re­quire­ment for the board to be ac­count­able for the gover­nance of the dig­i­tal in­vest­ment man­age­ment busi­ness.

Among oth­ers, the board must en­sure that the req­ui­site tech­nol­ogy ca­pa­bil­i­ties are in place; the risk man­age­ment frame­work is suf­fi­ciently ro­bust to man­age risks in­clud­ing cy­ber se­cu­rity re­silience; the out­comes pro­duced by the al­go­rithm are con­sis­tent with the dig­i­tal in­vest­ment man­ager’s strat­egy; and poli­cies are in place to mon­i­tor and reg­u­larly test the al­go­rithm used.

Li­censed port­fo­lio man­age­ment com­pa­nies may pro­vide dig­i­tal in­vest­ment man­age­ment ser­vices if they sat­isfy all the re­quire­ments in the up­dated li­cens­ing hand­book and rel­e­vant guide­lines.

Those who wish to of­fer dig­i­tal in­vest­ment man­age­ment ser­vices may ap­ply for the new li­cence ef­fec­tive yes­ter­day. The up­dated li­cens­ing hand­book and the guide­lines on com­pli­ance func­tion for fund man­age­ment com­pa­nies are avail­able at www.sc.com.my.

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