Patravali explained that not all wealthy individuals have access to wealth management services offered by private banks. An investor may have $1m in liquid assets, but not $5m-$10m to meet the minimum threshold for a wealth management account.
“What we are trying to do is to cater to the mass affluent and emerging high net worth individuals who have $50,000 to a couple of million who cannot afford a private banking account, as we believe that is an under-served market,” he told sister website Fund Selector Asia in a recent interview.
That client segment is also a target of some boutique wealth managers or independent financial advisers (IFAs). Pyrmont Wealth Management, for example, also believes that the market segment is under-served.
In Hong Kong, the regulator’s definition of a minimum amount for a professional investor is HK$8m ($1.1m). However, some bank’s minimum requirements are higher than that. For example, Standard Chartered increased the threshold of investable client assets to $5m, while JP Morgan’s minimum investment is $5m-$10m.
Like other robo-advisory platforms, Kristal AI’s retail offering only includes globally-listed ETFs. However, professional investors, as defined by the SFC, can invest a minimum of $50,000 and get access to a basket of stocks and bonds that subscribe to a certain theme, according to Patravali.
One example is a basket of FAANG stocks.
Given that the platform is AI-driven, the software is also able to do the asset allocation recommendation within the basket, according to Patravali.
The private wealth account also has a funds platform, in which investors can buy products that are only available to professional investors.
“The funds are not accessible to retail investors because they tend to have higher ticket sizes and the features that they have are not suitable for them. For example, some of them may have derivatives and some may be hedge funds,” Patravali said.
He added that like other wealth managers, Kristal AI has a due diligence process before putting a fund on its platform. At the moment, the platform only has around 15 mutual funds and the firm is in talks with other managers to add more funds.
The type 9 factor
Turning to its retail offering, Patravali said his firm has a Type 9 (asset management) licence from the Securities and Futures Commission, which allows it to operate as a full discretionary asset manager.
Although it is only allowed to offer ETFs to retail investors, the platform is able to rebalance portfolios without client approval.
Patravali added that rebalancing will be within the client’s risk profile and that users are still notified of changes in their portfolios. Both retail and private wealth clients can also opt out of full discretion.
Not all robo-advisors are able to automatically rebalance clients’ portfolios because they do not have Type 9 licences, Don Huang, co-founder and head of quantitative research at Magnum Research, said previously.
Magnum Research, which operates Aqumon, a robo-advisory platform for retail investors, cannot rebalance portfolios without getting a go signal from clients as it still does not have a Type 9 licence, Huang explained. The firm, however, does have a Type 1 (dealing in securities) and Type 4 (advising on securities) licences, which allows it to sell investment products and provide asset allocation recommendations to clients.
Another firm, 8 Securities, which operates the Chloe robo-advisor, does not have a Type 9 licence, according to records from the Securities and Futures Commission.
However, Yunfeng Financial, the firm behind Youyu Wealth, holds a Type 9 licence.
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