By Justin Harper
“We are a wealth management domain-driven technology firm focused on bringing the best possible experience between advisors and end clients,” said Aaron Low, the founder and CEO of Lumiq, a wealth management platform for advisors.
While technology is the great disruptor, Aaron is quick to point out that his company is much more than that. Lumiq offers a pure hybrid model which combines the human touch and expertise in investment advice with the cutting-edge technology of robo-advisors. It also wants to elevate the level of advisor capability to match the ever-evolving world of machine intelligence. Aaron believes this hybrid business structure delivers the best possible solutions for clients.
“It is this continued search to help enhance advisors’ professionalism together with the transformations in technology that will produce better outcomes for clients’ benefit. We simply want to create a true hybrid that is fit for purpose.”
Technology disruption, the strong growth of assets under management (AUM) and the increasing need for financial security provides a strong backdrop for the evolution of the wealth management business. The industry has been growing fast with a compounded annual growth rate (CAGR) of 15-20% in many parts of the world, including Asia.
Wealth management is now a key segment for banks and has grown steadily as a contributor to the valuation of banking groups over the years. This puts Lumiq in the sweet spot at the heart of an industry with plenty of room for growth.
As the wealth management industry grows, so too is software spending, which is expected to reach US$23 billion this year and projected to grow to US$38.8 billion by 2025. The Asia-Pacific region accounts for about 23% of the current global spend with Singapore accounting for approximately 4%.
Current practices, such as standardised low-fee robo- advisory and high-fee personalised private banking, have raised a series of challenges in addressing the complexities of the investment universe. As a result, this has created a misalignment of interests between client and advisor, and some trust issues have developed.
“A lot of this lack of trust is not because wealth advisors don’t try to do good, but many of them lack the right resources to plan a client’s financial journey in a holistic but yet robust and fiduciary manner,” added Aaron, who is an award-winning veteran of global fund manager PIMCO.
He was also on the board of trustees of the Singapore Government Pension Fund, and is on the advisory board of the Wealth Management Institute.
Lumiq is the brainchild of decades of his experience in wealth and asset management along with that of his investment team which has more than 180 years of global and Asian investment experience across hedge funds, asset management companies and even the International Monetary Fund (IMF).
Blending Humans And Machines
The thinking behind Lumiq is that by blending the best of human advisors and machine intelligence, it creates not just more effective client engagement but that it also improves the sustainability of the wealth advisor business model.
“We want to go to where the puck is going, not to where the puck is,” Aaron added.
Currently Lumiq is a business-to business (B2B) company but has plans to become consumer-facing (B2C) to provide better investment results to end investors. For now, the advisor has control of the sophisticated asset allocation platform at their fingertips.
Lumiq’s current objective is to build acceptance within the B2B space before expanding into the B2C space.
“Our platform consists of engines and features that are also applicable to B2C and it is something that we are in the midst of discussing. It will be fantastic if we can transform such a powerful platform to the B2C market with relevant user journeys too.”
Lumiq also has plans for a B2B2C offering.
Under the bonnet, Lumiq uses time-tested algorithms and processes to simplify complex investment decisions. These help both advisors and clients identify the most appropriate solutions, markets and products for different personal requirements and market conditions.
“The differentiating factor in Lumiq is that we not only strive to build better machine learning algorithms, we also target paradigms to improve human learning, essentially empowering financial advisors to assimilate big data, market dynamics and client behaviors,” said Aaron, who has a PhD in financial economics from the Anderson School, UCLA.
Since its launch, Lumiq has been helping wealth managers build businesses that are scalable, cost-efficient and able to respond quickly to changes such as new investment universes, new product launches and evolving regulations.
“We currently work with a major Japanese global asset manager, a large Chinese investment firm, and are in talks with local financial advisors and institutions in Singapore and Hong Kong,” said Aaron.
In the overseas markets it is working with a US financial advisory firm as well as an Indonesian government agency on pension funds. While Lumiq was officially launched in 2019, it soon ranked as the second best robo-advisor in Asia according to a survey from Kaplan Consulting Services.
It has also started working with the largest Asian investor in the blockchain investment space.
“Specifically, we are creating an investment process and framework for digital assets including cryptocurrencies that will allow investors to form a portfolio of both traditional securities and digital tokens in a process that is compatible with institutional best practice. I think the right way to think about cryptos is to regard them as digital assets which is really a broader universe than just cryptos or tokens. They are changing the way investors can participate in the broader investment universe.”
As a true hybrid next-generation platform, Lumiq is driven by three core modules: alpha (products), beta (markets) and gamma (clients).
“Our strength is the beta or asset allocation workstream where we provide leading edge institutional grade ‘automated’ portfolio construction tools. These range from asset allocation, optimisation to product selection optimisation within the context of customising for different clients in the most efficient manner. The manager can also easily customise and track portfolios according to his client’s needs on either risk, returns or loss probability.”
While robo-advisors have become more popular for retail investors, they are not always suitable for high net worth (HNW) clients and family offices. Lumiq is a hybrid built from the ground up, not a robo-advisor with a human element added on.
“We have built a dynamic system that can easily be used as a robo-advisor.”
During the pandemic, Lumiq noticed that many more retail investors were getting increasingly involved in the management of their own wealth and financial journeys. Following feedback, it enhanced the platform to meet these rising needs.
“The major realisation of the remote working world scenario is that it has highlighted the need to use hybrid platforms more than ever. It is just not enough to have a Zoom call nor a remote login but the powerful combination of advisor scenario walk-throughs with clients on hybrid platforms,” added Aaron, who is also Adjunct Professor at NUS & SMU in Singapore and at the China Europe International Business School (CEIBS) in China.
Long Term Player
“Given the wild swings over the past year in global stock markets, it is hard to say for sure if folks in general have become more risk averse. But we do know that mass affluent and mass retail are definitely concerned about financial returns due to a lack of job security.”
Negative real interest rates have laid siege to savings plans and there is heightened interest in investment plans. With the elevated risks in financial products, investors and advisors are finding it a challenging task.
“But we do see more people who are interested to invest for the longer term and not be caught out by the short- term market noises. As a long-term investment platform, Lumiq has seen more positive responses to it.”
For future investment trends, Aaron predicts that demand is likely to be in markets that offer diversified real returns, for example, thematic investments such as Environmental, Social and Corporate Governance (ESG) and its various components, technology and innovation factors, inflation assets, biotechnology and healthcare, including new markets like digital assets that have real business potential.
“We do have an exciting technology pipeline that we think will be helpful in creating robust channels and pathways to search for new sources of performance for end clients. And that should be the sustainable model of the wealth advisor,” he ended.
Issue: SG 57 MY 46 2021