Democratising Asia’s mid-market accredited investment space
Crossbridge Capital Asia’s CEO, Yai Sukonthabhund, and Head of Digital Strategy & Distribution, Charlie O’Flaherty, talk to Hubbis about how their evolving business model, technology and first-to-market fully automated offering is bridging the gap in the mid-market accredited investment space and the firm’s quest for regional expansion and assets under management (AUM) growth.
Crossbridge Capital Asia is making waves in the mid-market (AUM) sector. Whilst competitors are focusing on high-end wealth management, the firm is taking a different approach to help drive its AUM growth and expansions plans.
Yai Sukonthabhund, CEO of Crossbridge Capital, comments, “We have gone into fintech by putting up CONNECTs, which is our hassle-free, fee efficient method of bringing clients in with smaller AUM than will typically be required at the private banks.
“What we're looking to do is democratise it for the accredited investors. What we're finding is that the ultra-high net worth segment is being serviced very well, and over-banked in fact, whereas the middle sector is generally suffering in terms of service and fees.”
CONNECT by Crossbridge was developed to meet this aim. It is a low touch, high efficiency, fully automated investment platform for accredited investors. It is also the first to offer end-to-end digital onboarding. One of the strengths of the firm is the economy of scale that it can bring to clients – and that ultimately means lower costs with no commissions, administrative fees, brokerage fees or hidden charges.
Backed by its MAS-regulated singular entity, CONNECT does not hold client assets. Instead, once signed up, assets are custodied with BNY Mellon's Pershing LLC. Investment advice for the CONNECT Portfolios is supported by independent research firm, Morningstar, in conjunction with Crossbridge Capital's own in-house team of investment advisers.
This approach has seen their business model evolve from its early days as a classic wealth management firm. Bringing in a lower cost platform means Crossbridge Capital remains profitable with smaller accounts as it is running them through Pershing. O’Flaherty says, “We continue to service the larger accounts in the traditional style. I think between that and [the move] from a retro model to a fees for assets under management, we can manage our net income a little bit more actively than someone who's stuck in a large bank. And we have low overhead.”
Targeting the mid-market
Crossbridge Capital launched its platform in November 2016 to mass affluent individuals in Singapore, bound by its license to service accredited investors and not pure retail.
“If you're a Singaporean with SGD1 million worth of savings what would you be looking for?” says Sukonthabhund. “First of all, to access the private banking platform you probably need about SGD5 million of liquid assets in order to sign up as a client with most of these banks. At that level of wealth, you're still not one of the biggest clients and you would not get their highest level of service. You don't have SGD300 million, for example.”
Crossbridge Capital was unsure how their target market would respond. It need not have worried. Whilst it was very slow initially, it quickly picked up steam and currently boasts over USD200 million in AUM.
O’Flaherty comments, “We limit our offering to accredited investors because we can have products that are appropriate for accredited investors. So aside from the normal ETFs that you might find in a portfolio, we might have exposure to alternative assets like hedge funds. We use a very efficient product called Actively Managed Certificates (AMCs) which currently is not a retail offering.”
The right product offering
Despite the option to include a broad range of assets classes, Sukonthabhund is clear on the boundaries. “We don't need to pitch crazy ideas,” he says, referring to products such as credit derivatives. “We try to stay with the sensible stuff. You'd be surprised to find that people in that HNWI sector are actually very interested in the so-called ‘bare bones’ platform. It fulfils all their needs and it comes at a much lower cost.
“Our platform is able to accommodate an investor who is looking for stocks, bonds, FX, structured products, funds. That actually covers most of the investment universe for most HNWI people.”
Crossbridge Capital found that post-GFC, most people wanted simple investments that would allow them to sleep at night. “They buy bonds, they buy equities, they buy simple structured products. If you're accessing a lower touch type of product you should pay a lower fee for it. If you want to have the 300 km per hour car you buy your Veyron, but most people don't like to drive that fast,” says Sukonthabhund.
Fully automated platform
A key component underlying the whole platform is AI-driven technology. By using Bambu’s deep learning, artificial intelligence function called People Like Me, clients can access huge volumes of data and calculations to help them select appropriate goals.
“We built the initial solution in tandem with Bambu,” comments O’Flaherty, having worked with them for some of its IP. “We're on version 3.0, and now about 90% or so of the solution is in-house.”
The client onboarding is fast and simple. “Provided you fall within our classified risk parameters, generally you're onboarding is 100% digital,” says, O’Flaherty.
“The account is in your name at BNY Mellon’s Pershing, totally segregated from Crossbridge. “We have power of attorney to operate that account on your behalf. Pershing won't face individual investors unless they come through a Capital Markets Services (CMS) licensed entity like us,” he continues.
Crossbridge Capital imparts a partial opportunity to manage the account based on the needs or criteria that have been provided by the client. But even though the firm has full power of attorney, clients retain control. O’Flaherty comments, “We're limited to operate the account on your behalf at your instruction. Those instructions can be digital, which they typically are, where you set a goal, set your risk levels and decide on what your portfolio will be and then send instructions to buy it. Or we can take voice orders as well.”
O’Flaherty continues, “From a client's point of view it's discretionary as they don't have a say as to what happens when the portfolio gets rebalanced. The client decides which portfolio to be in, but we run the portfolio behind the scenes. That's different, I suppose, from a traditional portfolio, but it is a little bit less than the amount of control you would typically have in an advisory account.”
Crossbridge Capital is also providing a bespoke B2B solution. “The highest touch deal we've done to date involves a local market issuer of product, a local market custodian, our digital interface for the users, and our running the hedge. It's very much of a joint venture.
“This particular partner is a solid publicly listed broker-dealer that wants to grow through offering a digital interface to their clients and to attract more salespeople the same way,” he continues.
Positioned for expansion
With a successful start to its mid-market approach, Crossbridge Capital is gearing up for expansion including Hong Kong and Thailand. The firm believes its operations in Singapore are a distinct advantage that stands it in good stead. Sukonthabhund comments, “Singapore's a great base to start a business because it's safe and it's a well-regulated jurisdiction which is highly respected in financial circles.”
This, he says, will enable Crossbridge Capital to enter jurisdictions which are not as established, have other concerns or - have the facilities that are not offered in Singapore. Sukonthabhund continues, “Singapore has very high standards especially in financial services, much higher than some of the countries that are around it, it's a simple fact.”
“Using that, we can go out into the region and through our technology we can offer that level of service to the mass affluent in those places. The idea is, we would be working with partners in order to go out there and set up in different countries.”
Another great advantage that Crossbridge Capital has is its attitude towards transparency and efficiency. O’Flaherty comments, “We're 100% transparent when it comes to fees. There's no agenda, we don't have a product desk here pushing trades. We're not building any hidden fees into the trades. We are committed to being as efficient as possible. We have access to all the products that your bank has access to, plus institutional levels of coverage from the brokers’ brokers.”
O’Flaherty feels that the regulatory environment in Asia will, over time, reflect Europe. “What this means is more transparent fee structures, a flat playing field for competition…No hiding of fees, retro scessions are going away in Europe.”
“Singapore's heading in that direction and soon enough, many other countries will follow suit ,” he concludes.
Crossbridge Capital Asia – At a Glance
Crossbridge Capital Asia is an established global wealth management company with three licensed jurisdictions including Singapore, Monaco and London. Established in 2008, it has more than USD4 billion under supervision.
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