Robo-advisor reshapes wealth management industry

An artificial intelligence-fueled virtual financial advisor will make the Chinese wealth management market more fairer and more accessible. The AI assistant brings higher-than-market investment returns for clients, especially those with limited funds, said Licaimofang (Money Cube).

Chinese people have in total about 20 billion yuan (US$3 billion) in financial assets available for investment (excluding real estate assets), 49 percent of them belonging to people with investment assets between 500,000 yuan to 6 million yuan, according to industry sources.

These citizens can't utilize private banking services, the entry level for which is 6 million yuan, accounting for a very small percentage of people in China.

"It's not reasonable. Wealth management should be an inclusive service like health care and education," said Yuan Yulai, founder and chief executive of Licaimofang.

The tech firm offers AI virtual advisors to optimize investment decisions and avoid risks, which makes sense in China where stock prices often fluctuate heavily.

The company now has hundreds of thousands of customers, 98 percent of whom enjoy positive returns. The total return rate reached 16 percent in 2019, 10 percent in 2020, and 10 percent to date this year, despite the pandemic influencing various industries and the economy as a whole.

The company can provide a higher return than the market average despite risks that are inherent to investing in financial markets.

Comparatively, banks offer a 4 percent or less annual investment return. Private banking services, which require a high fund threshold, offer 8 to 10 percent returns.

Supported by the virtual advisor, one staff member can serve over 8,000 clients, which allows wealth management services to serve more people, Yuan said.

AI makes investment fairer as people have similar returns by percentage whether they pour in 5 million yuan or just 50,000 yuan, he added.

The AI system, operating for over five years, covers financial products analysis, client mood management and risk control features.

The AI advisor is more sensible and makes fewer mistakes with minimal human intervention. It brings sustainable investment returns and avoids long-term risks.

In the next five years, Chinese virtual advisors will surpass their US counterparts like Wealthfront and Betterment in investment volume, thanks to economic development and booming investment demands, Tsinghua University said in a report.

In the future, the company may add an "investment period" factor into the AI's system to offer more customized and flexible services, Yuan added.