Online portfolio management needs time to capture mass market

PETALING JAYA: Industry players are positive on the Securities Commission’s (SC) move to implement the online automated portfolio management services for investors, but it could take more time to take off as investors are more familiar with the conventional way in undertaking their investment activity.

“The Malaysian market is not ready for the full digital offers. This is the market behaviour, whereby they are still seeking conventional ways for their investments.

“Furthermore, the young generation is very busy nowadays in building their career, so their investments are limited to some common things such as shares and unit trusts,” a fund manager who declined to be quoted told SunBiz.

Nonetheless, the fund manager said the digitalisation of the investment portfolio is positive for the market as it will offer more product choices with low entry barrier.

“For my company as an example, if a customer wants us to manage an investment portfolio, he has to put in RM5 million for fixed income and RM1RM3 million for equity, depending on the individual profile,” he noted.

According to the SC, investors aged below 30 only account for less than 5% of the total investor base.

In a move to increase investors’ participation in the capital market, the SC introduced the Digital Investment Management Framework for companies to provide online automated portfolio management services to investors.

The aim is to replicate many of the key activities performed by traditional fund managers through online access to provide investors with a more convenient, affordable and accessible channel to manage and grow their wealth.

Through a digital investment management company, an investor can gain access to a greater range of investment products and services, track their investments anytime, anywhere as well as have access to affordable and transparent personalised financial advice.

In addition, there will be an automated periodic portfolio rebalancing either on a weekly or monthly basis.

Those who wish to offer digital investment management services can start applying with the SC. They have to fulfil the licensing and conduct requirements, such as to be locally incorporated with paid-up capital and shareholders’ funds of RM2 million.

The updated Licensing Handbook and the Guidelines on Compliance Function for Fund Management Companies are available at www.sc. com.my.

The companies need to select an asset allocation that suits the client’s needs, monitor the results and adjust the strategy on a periodic basis.

SC told a media briefing on Tuesday that some regional firms have shown interest in applying for the operating licence.

MRR Consulting managing partner Ooi Kok Hwa foresees it will be a trend going forward for the digitalisation of portfolio management services in order to cater for every single investor’s needs – target return and risk tolerance level.

To increase the attractiveness of the portfolio management services, Ooi highlighted the fee charged must be low or even zero commission.

“If they still charge a high fee, then there is no difference with the current investment schemes and people won’t go for it,” he added.

Currently unit trust funds charge an upfront fee and annual management fee of about 5.5% and 1.5% respectively.