Despite the fintech boom, robo advisors in Japan have yet to make their mark on the industry

Alexander Thomsen
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Robo-advisors in Japan are facing difficulties in winning clients and are increasingly looking for new ways to increase their managed assets

Since early 2016, we saw a rise in robo advisors in Japan, with the launch of Money Design’s Theo and WealthNavi.

Meanwhile, Hong Kong based 8 Securities had launched their own robo advisor service in Japan even earlier.

Despite the buzz around fintech and robo advisors in Japan, robo advisors are facing difficulties to win over clients.

These companies are increasingly looking for new ways to increase asset under management.

Also read: Singapore central bank and Japanese finance regulator partner to smooth fintech collaboration

See below the latest numbers of Theo, WealthNavi and 8 Securities for asset under management and number of accounts.

 Robo Advisor June 2016

 

September 2016 December 2016
  Account # AUM ($) Account # AUM ($) Account # AUM ($)
Theo 2,675 12,954,955 3,938 19,234,234 5,235 32,225,225
WealthNavi 86 1,261,261 269 4,801,802 528 9,810,811
8 Securities 133 5,225,225 155 576,577 146 585,586

Source JSDA: http://www.jiaa.or.jp/index_e.html; Currency conversion: 1 USD: 111 JPY

Money Design Theo

  • Currently the largest robo advisor in Japan, measured by asset under management, and has received around 2.8 billion yen (around $25 million, using 1USD: 111 JPY) in funding (Source)
  • According to rumours in the industry, Theo is pressured by investors, which could be the reason why Tomoyukari Hirose stepped down as President of Theo in March and instead was appointed Vice Chairman. (Source)
  • The high expectations of hitting a higher AUM, could have helped fuel Money Design decision to launch in January “MyDC”, which is an individual defined contribution service, using Theo’s algorithm (Source)
  • It was publicly announced last November, together with the capital injection from a group of regional banks, that Theo would look to provide its robo advisor services to Yamaguchi Bank, Maple Bank and Kitakyushu Bank. (Source)
  • Nothing has yet to be seen, but as banks don’t have the required license to use Theo’s service as white label, banks may add a banner on their website, which directs visitors to Theo’s website.

WealthNavi

  • WealthNavi has received at least 2.1 billion yen (around US$19 million, using 1USD: 111 JPY) in funding so far, and currently the closets pure robo advisor competitor to Theo. (Source: See Appendix B)
  • As seen in the table, WealthNavi was lacking behind, which was a strong incentive to publicly announce, they were entering into a business alliance with SBI Securities and Sumishin SBI Net Bank (Source)
  • The partnership with SBI, allows WealthNavi to provide its robo advisor service to the customers of SBI Securities, which will most likely be a huge opportunity for WealthNavi, considering that SBI Securities has around 3.6 million accounts. (Source)
  • Unlike, Theo’s plan to pursue its service to regional banks, it is possible that WealthNavi will simply stick with SBI going forward.
  • Due to the partnership with SBI, Wealthnavi is rumoured to have increased AUM to around $25 million at the end of January, a very large increase from the December 2016 numbers (insider information).
  • There is a good possibility that WealthNavi may take over as the largest pure robo advisor, simply due to the partnership with SBI, however, at the same time, it is clear that WealthNavi is increasingly relying on this partnership for its business growth.

8 Securities

  • The numbers above in the table says enough, 8 Securities Japan continues to have a tough time attracting clients.
  • To try something new, 8 Securities, added a digital advisor named Chloe and decided to provide portfolio recommendations, using Japanese listed ETFs for its new service Creo.
  • The company now also provides its robo advisory platform to financial institutions using its API, moving into the B2B space.

Financial Institutions are feeling the pressure and we have seen Nomura releasing its own robo advisor, Goal Base, while Mizuho launched SmartFolio early on. MUFG provides its robo advisor service using its eMaxis mutual funds with the service Portstar. Portstar has partnered with around 25 regional banks (Source), who now have banners on their website, which directs visitors to Portstar.

Also read: Automation and machine learning: How robo-advisors are taking the lead as Singapore’s new wealth managers

In the past one year, we have seen robo advisor services mushroom to around 15 players. Majority of these are financial institutions, who developed the robo service, to sell mutual funds. So far, the majority of them haven’t seen much success, except Rak Wrap, which has attracted around US$70 million at the end of December 2016 (Source). Additionally, we are seeing some movement in the B2B Market, with the launch of Quarterback Japan in late 2016 (the author of this article is an affiliate of QB Japan), focusing purely on B2B and 8 Securities also joining this area.

Robo advisor services in Japan

Robo Advisor Company Provided/Support Investment Vehicle Method
SmartFolio Mizuho Morningstar Japan Mutual Funds Mutual Fund Sales Tool
Goal Base Nomura Nomura Mutual Funds Fund Wrap
Portstar MUFG Ibbotson Japan Mutual Funds Mutual Fund Sales Tool
Funds Robo Quants Research Quant Research Mutual Funds Fund Wrap
Fund Me Kabu Morningstar Japan Mutual Funds Fund Wrap
Fund Robo SBI Securities Morningstar Japan Mutual Funds Fund Wrap
Matsui Lab Matsui Securities Matsui Securities Mutual Funds Fund Wrap
Toshin Mitsui Sumitomo Trust Bank Quick Mutual Funds Fund Wrap
Robo Advisor Bank of Yokohama Morningstar Japan Mutual Funds Fund Wrap
Rak Wrap Rakuten Securities Finatext Mutual Fund Managed Account
MSV Life Monex Saison Vanguard Vanguard ETFs based Mutual Fund Managed Account
Theo Theo Theo ETFs Managed Account
WealthNavi WealthNavi WealthNavi ETFs Managed Account
8 Securities 8 Securities Previously Morningstar, new one don’t know ETFs Managed Account
QB Robo Quarterback Japan Quarterback Group ETFS & Mutual Funds B2B White-Label Robo

Conclusion

Moving forward, we will see increasingly strong competition as more financial institutions are joining the trend, while also new pure alternatives are entering the market, like Folio. The robo-advisor initiatives that have hit the market in Japan, so far largely appear tailored to support the sales of mutual funds. However, more new alternatives will emerge like B2B and hybrid robo advisor services.

Appendix A: Company links

Robo Advisor Company Links
SmartFolio https://fund.www.mizuhobank.co.jp/
Goal Base http://www.nomura.co.jp/goalbase/#/
Portstar https://portstar.mukam.jp/
Funds Robo http://www.quantsresearch.com/
Fund Me http://kabu.com/
Fund Robo https://www.sbisec.co.jp/ETGate
Matsui Lab http://www.matsui.co.jp/
Toshin http://www.smtb.jp
Robo Advisor http://www.boy.co.jp/e/
Rak Wrap https://wrap.rakuten-sec.co.jp/
MSV Life https://www.msvlife.jp/
Theo https://theo.blue/
WealthNavi https://www.wealthnavi.com/
8 Securities https://www.8securities.co.jp/
QB Robo http://www.qbjapan.jp/


Appendix: B: WealthNavi Funding

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