Jack Ma-Backed Yunfeng's Investment Robo-App Targets the Masses

  • Yunfeng Financial offers auto advice on wealth management
  • App’s threshold of $800 aims to attract less wealthy clients

Yunfeng Financial Group Ltd., the financial services company backed by Alibaba-billionaire Jack Ma, has created a robo-advisor application to manage the wealth of regular Chinese and Hong Kong investors, a segment traditionally neglected by banks and financial institutions.

The service -- called Youyu -- targets anyone who has a bank account in Hong Kong with at least $800 to invest. Yunfeng expects to attract tens of thousands of investors by the end of this year, Chief Executive Officer Li Ting said in an interview in Hong Kong.

Yunfeng, backed by the founder of Alibaba Group Holding Ltd., joins a host of financial service outfits employing technology to home in on China’s financial markets. But unlike traditional private banks that target high net-worth individuals, Yunfeng wants to use the app to go after lower-income Chinese and Hong Kong investors who’re keen on buying securities overseas. That’s a market segment too costly for most traditional financial institutions to cover, because of the sheer number of potential clients.

Yunfeng, which already caters to wealthier people, hopes that creating an app to automate procedures such as risk-appetite assessment and know-your-client checks will make its services more accessible to less-wealthy individuals. About 70 percent of mainland Chinese investors surveyed by Hang Seng Bank Ltd. in January said they planned to increase their global allocation for investment in the next 12 months.

“Traditional institutions, their client base is quite limited, the resource is quite limited. They cannot provide the services,” Li said on Thursday. “But for fintech, actually we can serve millions of clients online at the same time.”

Yunfeng’s app marks an attempt to expand beyond its roots as a brokerage and delve deeper into wealth management, securities trading, employee-shareholding services, research and corporate finance. Formerly known as Reorient Group Ltd., the company was renamed Yunfeng Financial after a capital injection by investors led by Yunfeng Financial Holdings Ltd., another private outfit backed by Ma.

Ma owns 29.85 percent of Yunfeng Financial Holdings Ltd., which in turn owns about a 37 percent stake in Yunfeng Financial Group through entities it controls.

The initial costs for building such a platform were substantial, Li said. Yunfeng’s staff costs jumped 86 percent last year after it hired more developers in China -- about two-thirds of its employees are programmers. Its operating expenses also increased 76.6 percent in 2016.

Yunfeng’s Youyu app currently partners with 13 global mutual and money-market funds, including those run by Franklin Resources Inc. and Manulife Financial Corp. Youyu will generate investment advice for users based on their risk tolerance, but also let them allocate money based on personal decisions, said Li. Clients can then track the returns and compare which is superior.

Financial institutions around the world are turning to technology to reach investors and fend off increasing competition from internet firms. UBS Group AG, the world’s biggest manager of money for the wealthy, is giving customers access to an online service in markets such as the U.K. and Taiwan that invests their money based on information they provide about themselves. Deutsche Bank AG and Morgan Stanley are also building robo-advisers, algorithms that help people build and manage portfolios with little or no human interaction.

There’s some evidence that the format is gaining wider acceptance. In Hong Kong, more than 75 percent of customers are willing to receive automated advice for financial services products spanning bank-account opening, insurance and investments, according to a survey by Accenture Plc released in January. That was close to the average in other markets such as the U.S., U.K. and Singapore.

Pushed by China’s “blockbuster deals” in 2016, Asia-Pacific financial-technology investments last year hit $11.2 billion and surpassed North America for the first time, Accenture said in a separate report in February. North America attracted $9.2 billion, while Europe lured $2.4 billion.

Chinese financial-technology investments this year may exceed 2016’s record $10 billion as companies continue to raise funds for expansion and big banks grow their digital services, Albert Chan, managing director of China financial services at Accenture, said in an interview in March. More money will go into technology such as robo-advisers, online lending and investment services, he added.

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