Investing in Singapore—According to French economist Thomas Piketty’s 2015 book, The Economics of Inequality, Investing is only for the wealthy — those who have enough money to cover their basic needs.
A “tendency of the rate of return on capital to exceed the gross return on the economy” persuades him that “wealth breeds prosperity” Singapore’s early years saw the wealthiest residents of the country have exclusive access to personalized investment advice and a wide selection of investment products. In contrast, wage earners had to do with low-interest savings accounts and fixed deposit products.
More foreign asset managers emerged in Singapore as the city-state established itself as a financial hub, decreasing the entrance barriers to wealth accumulation and allowing more people to participate.
Investment-skewed insurance products were one of the significant expansion drivers since they provided new avenues of wealth accumulation for consumers, even if many of these products came with hefty costs and lengthy lockup periods.
However, despite these advancements, the average investor still had to deal with expensive broker fees and a lack of clear investing options, which wealthy investors could handle easier.
In the modern era, the advent of financial technology (or fintech, as it is more commonly known) presents a unique chance to make a difference and close the wealth gap. In today’s world, everyone should have access to high-quality financial advice, and everyone should be able to participate in their financial destiny. According to some definitions, “fintech” refers to technology that enhances, streamlines, digitizes, or disrupts traditional financial services. There is no standard definition.
The fintech industry has grown tremendously during the last few years. Over 750 organizations are thought to have their headquarters in Singapore alone.
According to the Singapore Stock Exchange (SGX), 40% of all Southeast Asian Fintech companies fall under this category. According to a report, the worldwide robo-advisor market is expected to grow to S$6.2 trillion by 2027.
Investing in Singapore: The Rise of Fintech
The fintech finance landscape in Asia has been less turbulent due to the pandemic than in other regions, particularly China and India.
Fintechs, including robo-advisors, received a total of US$3 billion in funding in Singapore last year, demonstrating that investors are aware of the prospects in this area.
Fintech and robo-investment companies are changing the way we invest, in addition to how much money is coming into them.
By 2027, the global financial management platform industry, which includes robo-advisors, is predicted to increase from $2.2 billion to $7.2 billion worldwide, according to data by The Insights Partners. Because robo-advisers are likely to overtake traditional human advisors in market share, they will be an essential factor in developing more competitive investment options for consumers, allowing them complete access to the financial markets.
It doesn’t mean that human wealth managers are doomed; rather, existing talent will be able to pivot, reskill, and discover more job opportunities as the market grows and more local banks, like Grab and Shopee, become digital. According to data, online brokers and digital wealth management platforms, particularly among millennials and Gen Zs, have witnessed significant traction among Singapore’s retail investors.
Most of its appeal is a combination of the simplicity of use and reduced fees compared to traditional financial institutions, advisors, or brokers and the use of technology to provide guidance.
Traditional institutional investors like pension funds, insurance companies, and ultra-high net worth individuals who have invested six-figure sums or more can now buy institutional share classes of investment funds through digital financial advisers.
PIMCO Income Fund, for example, has a 60 percent reduced fund-level charge for investors who choose to invest in the institutional share class instead of the retail share class.
Investment opportunities have been made more accessible to a broader range of investors, allowing them to retain more of their gains and help grow wealth over time. However, other developments worldwide are opening up investing prospects for the general public. In the case of real estate crowdfunding, investors can expect a 10% to 15% return on their investment.
Crowdfunding allows a group of individuals to pool their resources to purchase a piece of real estate or lend money to a developer to help fund the construction of a new building. Individual investors then receive a share of the profits proportionally.
According to Ernst & Young, this market will be worth $9 billion in 2021 and increase at a compound annual rate of 18.5%.
Since a single investment in real estate might be prohibitively expensive, let alone a portfolio of investments, this shows how an asset class previously unavailable to the typical investor can help them expand their wealth.
In addition, innovative platforms like Moonfire and ADDX allow investors to invest in private equity and alternative investments in smaller amounts, with the latter even eliminating lockups for private markets.
The Monetary Authority of Singapore (MAS) monitors financial institutions to ensure that they are not presenting goods as risk-free. Consumer education remains the essential plank to minimizing excessive loss.
Investing in Singapore: The Catch
Even though fintech companies have created a niche for the tech-savvy, youthful investor who values immediacy and a sense of ownership, it is still necessary to evaluate the risk of each fintech product in the same manner that one would diversify their investment portfolio.
It’s possible to have a product that focuses on access while allowing investors to make all of their own decisions, whereas another combines both access and advice. Both have a role in reducing one’s risk of losing money and increasing one’s financial security.
Nevertheless, the range of fintech products will only expand in the future. Fintech start-ups worldwide are looking for new methods to bring wealth growth to the public, and online brokers and digital advisors may be only the beginning.
The introduction of savings accounts through Buy Now Pay Later fintechs can even be observed in other countries. You also have Grab, created on the back of taxi-hailing and food delivery services, and Sea, an e-commerce powerhouse, granted digital banking licenses in the Philippines.
It’s also worth noting that the local fintech industry has significantly benefited from the efforts of MAS. New financial goods and services might be tested in the natural environment of the FinTech Regulatory Sandbox, which was set up by the Malaysian Securities and Futures Commission (MAS).
To avoid compromising the safety and security of the financial system, the sector learned how to contain breakdowns without compromising legal and regulatory standards. This innovation also fueled the expansion of Singapore’s fintech industry.
These public-private partnerships have also helped create a new generation of investors raised by mobile phone nannies and will be the next generation of investors.