Endowus Chairman Samuel Rhee on Mission Possible - Building a Digital Wealth Management Platform of the Future
Created as a new digital platform disruptor in 2019, Endowus has forged ahead during the pandemic, this year announcing SGD30 million (USD22.3 million) of Series A funding led by Lightspeed Venture Partners and SoftBank Ventures Asia, between them putting up USD17 million of the total, and well supported also with another USD5.2 million from major names including the UBS FinTech investment vehicle UBS Next, as well as Samsung Ventures and Singtel Innov8. A further USD27 million followed in November from Prosus, EDBI, and Z Holdings with several earlier investors returning with follow-ons. This takes the full year fundraise to above USD50 million. Endowus prides itself on offering access to what it calls ‘superior’ investment products, personalised advice, and lower costs on a digital investment platform for all types of investors, and the new money is helping Endowus fight even tougher with disruptors such as StashAway and Bambu, with global digital platforms such as Swissquote or Saxo Markets, and with the digital platforms of the global and local banks, especially with names such as DBS, which continues to roll out its state-of-the-art digital wealth offerings. Hubbis ‘met’ recently with Samuel Rhee, Chairman and Chief Investment Officer at Endowus, to learn more about the platform’s approach and why he and colleagues believe they offer the best digital platform and experience for individual investors to meet their growing needs in saving and investing for the future, in particular in addressing the need for holistic retirement planning. He explains how Endowus has promoted itself to a pre-eminent role as a digital investment advisor for the vast Singapore Central Provident Fund (CPF) and the Supplementary Retirement Scheme (SRS), making Endowus the only digital WealthTech platform allowing customers to manage their private wealth and public pension, a move that Rhee believes is a first of a kind in Asia, and possibly globally. And he is confident that Endowus is building the right offerings and the right scale to become the go-to digital advisory and investment solutions platform of the future, not just in Singapore but soon in Hong Kong and then further afield in Asia.
Rhee opens the conversation by explaining that the Endowus platform is built on remarkably powerful technology that allows it to excel, for example enabling investors to manage their government pensions seamlessly online, with end-to-end onboarding and investment execution and reporting. “We were driven to create our solutions because there was a major gap in the market,” he reports.
He adds that there was not enough digital advice, not enough seamless, joyful experiences, and easy access to great financial products available, and that the whole process was cumbersome.
Addressing personal and society needs
“Quite simply,” he says, “we launched in 2019 on the premise of wanting to help people invest more easily and confidently today and thereby make life better for their tomorrows,” he explains. “We offer high quality and objective advice, access to great products at low cost to help them solve complex problems such as retirement adequacy. This, we believe, is the biggest generational challenge we face as a society. We democratise access and solve individual and societal needs at the same time.”
He explains that the relationship to the Singapore CPF, or Central Provident Fund, is critical to the proposition. For those not fully aware, the CPF is a one-stop social security system in Singapore, handling an individual’s preparation for pension, medical support through life and retirement, as well as education, and even offering the flexibility to use funds to pay for home deposits. “It is incredibly well-planned and highly flexible,” Rhee comments. “The digital access we have created for any of the CPF members to invest through our platform is unique and compelling.”
The CPF factor – a multi-hundred billion doorway
He explains a big portion of an individual’s CPF is the ordinary account, which they can use for housing and for their own choice of financial investments. It is also significant, as the individual contributes 20% of income and the employer another 17%, so this totals 37% of income up to a certain cap, making it one of the highest mandatory social security plans in the world, and the total is rising apace and is currently approaching SGD500 billion in total, of which the ordinary account is about SGD200 billion, and that itself will be more like half a trillion by the end of this decade.
“CPF investing used to be an entirely offline experience, and the beauty of what we have done is to create a seamless, pleasant and highly efficient online experience whereby CPF members and Endowus customers can invest in any approved assets through our platform at the lowest cost,” Rhee reports.
The Three Pillars
Rhee explains that Endowus is classified as a digital independent financial advisor, or a digital fee-only advisory firm founded on three pillars of success vital for investing as an individual, namely advice, access and cost.
“Our business model is built on these three pillars,” he reports.
“We see ourselves as the future of wealth, the digitised future of advisory services. We want to be fee-only; we want to be paid only by the client, nobody else, so that we are aligned to the best interests of the clients to work towards their best outcomes, and not get paid a single cent by other incentive providers such as fund managers or financial institutions.”
Banishing the trailer fees
Although Endowus still sometimes receives retrocessions from the providers of the unit trusts and funds, the platform rebates 100% of those fees to customers. “Accordingly, we negotiate as high a trailer fee as we can from these fund managers and then pay every cent back to the clients,” he explains. “The result is we are able to achieve the industry's lowest fees possible for collective investment schemes, and most certainly the lowest cost access to any unit trust in Singapore in most cases.”
But the firm then takes it one step further, he elaborates. “We also tell the fund providers we also need to provide clients access to the institutional share classes, so essentially we become the institution that obtains retail access to those institutional share classes, through our collective power,” he reports. “The result is we access world-class funds at the lowest costs, and we do not then layer on other fees such as sales charges, custody fees, transaction fees, and so forth. We simply access the institutional share classes, we rebate 100% of the trailer fees, and we charge only the advisory fee.” Endowus charges an annual fee based on the value of assets held by the customer. This ranges from 0.05% to 0.6%, depending on the type of investments the customer makes.
Alignment with the customer
Rhee has strong views on advice, arguing that there is what he terms a “massive misalignment in the industry” and that people either get no advice or misaligned and inappropriate advice. “We are trying to provide useful and relevant advice through a digital platform, with financial education a critical part in improving financial literacy,” he reports. “We take our fiduciary duties seriously, but it is not only due to regulation, it is inherent to our business model. The advice is individual, hyper-personalised, and delivered digitally.”
And that leads him naturally to the third pillar, namely access. “We are opening the doors to some excellent products that could and should have been here,” Rhee states. “For example, we have brought in the Vanguard passive index funds to CPF, working with Vanguard and local partner Lion Global to bring passive index investing to CPF members for the first time ever. We have brought in PIMCO’s institutional share class fund as another example. We have curated a selection of best-managed ESG funds from around the world, with the purchase either in Singapore dollars or with a hedge to ensure clarity and low cost. Access to products is a vital third pillar that is equally critically important to an individual's success in investing and building wealth for the future.”
Building the digital private bank of the future
He maintains that Endowus is very different from firms that might be optically considered as key competitors. “We are not just a robo-advisory platform, and actually we think they fail in providing advice,” he comments. “At the same time, these platforms are really more like discretionary fund managers, making and selling their own products. But we are building a total wealth platform, like a digital private bank of the future, but one with which you can start investing for just SGD1000 and you get immediate access to institutional funds, access to discretionary and advisory portfolios, access to solutions that were previously not available to retail, and we are helping you boost your financial resilience now and for future retirement. This is our DNA, and it is significantly different from the competition.”
Rhee expands even further on his vision of the market and the evolution of demand.
“The reality is even here in highly advanced Singapore, the Switzerland of Asia, the average investor is still ill-informed,” he reports. “Things are improving, but the market still lags behind. We need far more client advocacy; we need to drive change on the demand side.”
And on the supply side, he explains that there is great resistance to change. “I do not believe retrocessions or trailer fees should be permitted here,” he states. “They are banned in other major developed market jurisdictions, and that is what I would like to see here and across Asia. The regulators have been helping financial institutions build or replenish capital since the global financial crisis, but I feel we need to see the regulators more energetically drive better and best practices; that is what we are trying to achieve, working towards a better way of doing things on the supply side.”
He observes that Australia is leading the way in Asia Pacific, and the MAS is certainly looking at all these areas. he reports, “I am optimistic that in this region we will see further evolution of regulation and practices that will result in a better landscape for individual investors, but I would like it to happen sooner.”
His first mission is to keep evolving the offerings. He explains that the firm has since mid-2020 launched a series of enhancements. In mid-2020 they announced their first fully digital cash management offering, Cash Smart, which at the time allowed Singapore investors to earn a projected return of 1.1% to 2.2% per annum, one of the highest in the industry and at least 10 times higher than typical bank deposit accounts. In March 2021, they launched an ESG offering, which allows investors to invest in multi-asset sustainable portfolios. And then, in October, Endowus launched Fund Smart [see box article], which Rhee says is an amazing tool for building fund portfolios, replete with all types of data and simulations to help the customers curate the right selections that are relevant to their needs.
“We like to survey the market to determine the needs and expectations, and then launch solutions to meet needs and trends ahead,” he explains. “We will keep doing so, staying ahead of the market and continually broadening the offering to meet our clients’ needs.”
Secondly, he wants Endowus to curate and offer better advice and better solutions. “A holistic retirement solution that encompasses all of a customer’s wealth, including their CPF and SRS funds would be the ideal we are seeking,” he reports. “If we can combine each customer’s liquidity, savings and investments into a holistic picture of their future wealth and retirement scenarios, then we will have a unique tool that doesn't exist in the world right now. Some solutions look at accumulation, others at decumulation, but nobody offers a dynamic, one-stop-shop solution that continuously adjusts making it hyper-personalised and constantly relevant.”
And the third mission is expansion overseas, first to Hong Kong, where they have their new license and will launch in mid 2022, and later to Korea, Japan, and Taiwan, and then on to the ASEAN countries. “Singapore has been the first mission,” he reports. “With more than 200,000 millionaires in Singapore, there is a market where we can build scale, and Southeast Asia will come later. However, more patience will be needed there in building wealth, so we see North Asia as more natural, first Hong Kong and then the surrounding countries.”
He draws the conversation to a conclusion by commenting that Endowus is at the pioneering end of the market. “We are racing ahead in terms of how fast we are scaling in Singapore, and with an AUM of well above SGD1.5 billion already, we are similar in size to our closest competitors, but growing even faster; accordingly, by early 2022, we should be the biggest digital wealth platform here. We will then take another year or two to become profitable, but with the growth levels we are achieving, that is well within our sights, and we are confidently on track.”
He says Endowus sees itself not only as a financial service organisation, but also a content provider, enhancing education, understanding, confidence and outcomes. “For example, the rate at which we have been producing meaningful, high quality financial content is pretty astonishing. We have either an insights article or white paper published every week. When COVID hit, we quickly pivoted from live events to virtual webinars co-hosted with senior executives from top global fund managers and also personal finance bloggers, which has been a mainstay in our content strategy. Ultimately, our goal is to empower all investors to improve their financial literacy, in order to make prudent financial decisions and secure their own financial futures.
Ahead of the pack
His final comment is that although many facets of the global digital platforms with which Endowus also competes are worthy of admiration, he believes that for individual investors Endowus is at least as good in some areas and considerably better in many aspects. “Some global platforms have already withdrawn, others are very niche, some are highly transactional, some user experiences are in reality clunky and more for professional investors and for B2B models. But we are at the forefront in broadening digital adoption in wealth services; we are at the ‘Netflix’ end of the enjoyable, interactive user experience, making investments and smart financial planning a pleasant journey.”
The Endowus Fund Smart Hybrid Platform: Striving to Curate Best-in-Class Fund Solutions
In recent months, Endowus has debuted its new and improved Fund Smart platform, heralding an innovative hybrid fund platform that combines the best of digital financial advisory services and an open fund platform. And all this on the back of lower fees on an exclusively selected list of best-in-class funds. Fund Smart provides retail investors direct access to 200 curated, best-in-class funds from over 35 of the world’s leading asset managers. Investors achieve greater convenience and control in buying unit trusts and constructing customised portfolios at low, transparent and fair cost.
After crossing SGD1.5 billion in assets in just two years since its official launch, Endowus has moved quickly to further innovate and improve Singapore investor access to best-in-class funds at a lower and fairer cost than ever before. With a revised pricing of 0.30% per annum, Endowus can save clients 50% or more per year on their all-in investment costs for unit trusts, with around 200 of the most popular funds now cheaper on Endowus than on any other retail platform in Singapore.
New and improved
“The improved Fund Smart is a major advancement in terms of innovation and cost for individual investors in Singapore,” says Samuel Rhee, Endowus Chairman & Chief Investment Officer. “Improving our clients’ investment experience and empowering them to make better choices is a key mission of Endowus and we have broken new ground with the new Fund Smart service and tools. On top of a greater selection of geographical and thematic funds, we have created an improved fund screening experience and the lowest cost access single fund offerings.”
Screening and filtering the best available
Endowus’ all-new fund screening tool leads the industry in allowing clients to easily filter, view and learn about each fund, including complete transparency on the reasons to which Endowus’ Investment Office has selected these specific funds and the detailed breakdown of fees and rebates.
Fund Smart offerings continue to expand rapidly, and now include many strategies that can be invested using cash, CPF and SRS savings and target different sectors and geographies across the globe, all managed by leading global asset managers.
Many of the funds made available to retail clients have previously only been available to institutional and ultra-high net worth investors. Strategies exposed to real estate, megatrends, healthcare, technology, income and more, have been screened and selected by the Endowus Investment Office and are now available to investors starting from as little as SGD1,000.
Investors can easily compare funds in real-time and view curated information that is most pertinent to making informed decisions. These include performance, all relevant fund data, and the extent of fee savings on Endowus versus other platforms, in addition to more advanced risk metrics for experienced clients.
Transparency and quality
“As with everything at Endowus, transparency is key,” said Gregory Van, Endowus CEO, in late October this year, while sharing about Fund Smart. “Some investors look for agility to quickly capitalise on opportunities they spot — we are focused on providing data-driven technology and access to suitable products and experts to support their goals as they take control of their financial future.”
“We provide institutional quality screening and due diligence to select the best-in-class funds in the universe based on a proprietary fund selection framework by the Endowus investment office. And we do this based on the expertise of man and machine: a quantitative screening framework coupled with qualitative assessment of the global fund managers and their respective strategies,” added Rhee.
Giving back the trailer fees
As a fee-only investment platform, Endowus is only paid by its clients. This is different from most incumbent distributors, such as the leading fund platforms, brokers and private banks, that keep the recurring trailer fee ‘kickbacks’ paid by fund managers. Those trailer fee commissions can reach as high as 70% of the fund fees, but by returning 100% of these fees to their clients, the all-in investment costs are lowered dramatically.
Endowus also remains independent and can only be paid by its clients directly and transparently. “Our digital fee-only investment platform is the future of money management, where structural alignment and transparency are embedded from the get-go; it is not just about lower costs, but about achieving better outcomes for the client and the industry,” says Rhee.
And Endowus has assembled a who’s who of branded asset management names on Fund Smart. Today, those asset managers available on Endowus Fund Smart include: Aberdeen Standard Investments, AllianceBernstein, Allianz Global Investors, Amundi, BlackRock, Columbia Threadneedle Investments, Dimensional Fund Advisors, Eastspring Investments, Fidelity International, First Sentier Investors, Franklin Templeton, Fullerton Fund Management, Goldman Sachs Asset Management, Harris Associates, HSBC Asset Management, Janus Henderson, J.P. Morgan Asset Management, Legg Mason, Lion Global Investors, Mirova, Natixis, Neuberger Berman, Nikko Asset Management, PIMCO, PineBridge Investments, Schroders, Thematics Asset Management, UBS Asset Management, UOB Asset Management and Wells Fargo Asset Management, with more to come.
Getting Personal with Samuel Rhee
Rhee is Korean but lived mostly in the UK from the age of seven, enjoyed most of his education there and completed his degree in Economics and Public Administration at Royal Holloway College, University of London. He then spent roughly 25 years in finance with several companies including Morgan Stanley with whom he was working for 17 years, based in London, Hong Kong for seven years and then Singapore for 13 years, all the time in investment banking, equity research and asset management.
It was during his time from 2005 as a fund manager that he gained some fascinating exposure to new disruptors such as Tencent, Alibaba and many others. “During my time at Morgan Stanley Investment Management Asia, we obviously managed billions of dollars of exposure to equities, mostly for sovereign wealth funds, major institutions, pension funds and endowments,” he reports. “I was fortunate enough to then become the CIO, where I was involved in a lot of macro asset allocation and then in 2009 the regional CEO for my last four years there, until 2017, when I ventured outside of my comfort zone, and into the world of financial technology.”
He initially thought he was going to be simply a venture investor in disruptors in financial technology, often taking on advisor roles as well to help founders, but he soon spotted the opportunity to bridge a yawning gap in wealth management, especially in addressing the needs for planned retirement and to enable every individual - not just the high net worth - better succeed in building their financial future. “The global pension crisis is in reality a gigantic human tragedy, yet there is no seeming sense of urgency to tackle it head on. We do, and Endowus is our effort at spearheading that initiative.”
He is married with two sons of 16 and 15, and a daughter he describes as his ‘little princess’ who is now eight years old.
Hobbies such as reading, a great pleasure of his, are on hold for now, as he is so intensely busy building the business while balancing that with being a family man. “Being a start-up leader of a rapid growth financial platform is all-encompassing,” he says. “It eats up the days and it is incredibly intense, but remarkably rewarding on so many levels. Relaxation is family time, swimming, basketball with my boys, walking the botanical garden, whatever we can find time for. I also love soccer, but my knees are a bit dodgy, and the pandemic has prevented any playing time, so I have to be content with watching on TV sometimes, particularly Spurs, the team I have supported since I was 8 years old.”
When he does find time for reading, he turns to tomes on macroeconomics, especially areas like developmental economics and behavioural finance, as well as books on leadership and these days, on scaling start-up ventures. “I am also a Christian, and find theology fascinating, with my interest extending to other religions and philosophies as well,” he reports
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