How to Invest Intelligently in Southeast Asia
StashAway is targeting professionals currently underserved by premium banks
PHOTO CREDIT: Getty Images
After chatting with representatives from two different banks in Singapore and asking friends for recommendations, Michele Ferrario was still no closer to finding suitable investment options for his needs. It then became clear to him that there was no real platform that enabled people to invest intelligently.
“The next thought was: let’s build it!” says Ferrario, who now serves as co-founder and CEO of StashAway.
According to Ferrario, StashAway’s target demographic are professionals in Singapore, between the ages of 30 to 45, who have a few hundred thousand dollars in investable assets. She says this demographic is currently underserved by premium banks. StashAway can also cater to younger investors and higher net worth individuals.
Just how “intelligent” is StashAway’s platform? Ferrario says one of their more interesting features is their proprietary investment framework called economic regime-based asset allocation (ERRA) that monitors macroeconomic and market data to make portfolio adjustments with a medium to long-term outlook for each asset class.
“In December 2017, StashAway increased its allocation to gold (GLD) for all portfolios above a certain risk target. The change in allocation was triggered by a severe undervaluation of gold vs its fair value, given the economic situation, and by a change of momentum in gold’s pricing,” says Ferrario.
In four months, he adds, GLD has gained approximately 7 percent.
Ferrario says the hardest part of building the company is gaining trust as a wealth management solution — first with early team members, then with regulators, followed by investors, and now with customers.
It all begins with hiring team members who embody your values. Ferrario recommends that fintech companies should not only look at people from the financial industry. “In order to truly innovate, you need out-of-the-box thinking and a set of different approaches and capabilities,” he says.
With StashAway, gaining consumer trust is also part and parcel of the success of the business model.
“We only make more revenues if a customer’s portfolio grows with us, and we do not receive any revenue from anybody other than the customers themselves. By prioritizing transparency, we’re earning the trust we need to be able to continue delivering the best possible investment product,” says Ferrario.
Another key to gaining consumer trust is successfully communicating StashAway’s value proposition, which Ferrario identifies as three-fold. The first is that StashAway’s automation eliminates the emotions that can be harmful to making smart investment decisions. The second is StashAway’s asset allocation framework that adjusts portfolio compositions as macroeconomic and market cycles change, which an individual investor would have difficulty in building such a sophisticated framework.
Lastly, a person who is investing $1000 per month and wants to invest into 8 to 10 asset classes would not be able to because of rounding issues. “StashAway solves this issue by letting customers own as little as 0.0001 units of a given ETF, making it possible to always have an optimal asset allocation,” says Ferrario.
Over the last three quarters of 2018, Ferrario says that StashAway will continue to focus on their product, expand their number of users in Singapore, and launch operations in a new, as of now undisclosed, market.