This article first appeared in Personal Wealth, The Edge Malaysia Weekly on December 24, 2018 - December 30, 2018

In July, Wong Wai Ken left his job as vice-president of equity capital markets at Affin Hwang Capital to join StashAway, a two-year-old Singapore-based digital wealth manager that was just setting up its office in Kuala Lumpur.

But before taking on the post of country manager for Malaysia at the start-up, he had a relatively regular career path in finance. It had been his dream to be an investment banker.

After graduating with a degree in economics and finance from an Australian university, Wong worked as an investments associate at Khazanah Nasional Bhd. This was followed by four years at Affin Hwang Capital.

“I was very comfortable in my investment banking job. I still had a lot to learn and had a very secure job as VP. A friend of mine in

Singapore told me about this opportunity, but I did not take it seriously at first because I had never planned on being part of the start-up community,” says Wong.

But the opportunity piqued his interest when he learnt that StashAway had received its Capital Markets Services Licence from the Monetary Authority of Singapore (MAS) the previous year. Also, the three co-founders — CEO Michele Ferrario, chief investment officer Freddy Lim and chief technology officer Nino Ulsamer, who had vast experience in portfolio management, technology and building companies — impressed him.

“When I was thinking about changing careers, I asked myself: In 10 years’ time, do I want to look back and say I had the opportunity to join a really interesting outfit with a lot of potential? Or do I want to be on the wrong side of history and continue to believe that there are no disruption problems and that it will be business as usual forever? I wanted to take a chance to be part of the new financial technology (fintech) frontier,” says the 30-year-old.

StashAway became the first company to receive a digital investment manager licence from the Securities Commission Malaysia last month. The firm offers a

robo-advisory service that invests users’ money in a basket of US-listed exchange-traded funds (ETFs) based on their risk profile and adjusts the allocation according to market conditions.

Currently, there are few affordable options for Malaysians when it comes to investing in foreign ETFs. “I really believed that this product would fit Malaysians and we would get a lot of traction because the alternatives in the market were quite limited. I immediately understood the value proposition, so it was very easy for me to make the decision to join,” says Wong.

StashAway could appeal to anyone, from millennials to high-net-worth individuals (HNWIs), he adds. “It is a sophisticated product with a lot of intelligence built into the platform. It is now available to people at their convenience and at a low cost. So, everyone, including millennials, can find use for it.

“For example, a fresh graduate will be able to put some money aside because there is no minimum amount to start investing. Someone in his thirties would have identified his investment goals and wants to save for his first investment property, children’s education or retirement. For HNWIs, it helps them to invest in a basket of global ETFs and get relatively cheap exposure to the US dollar, which was an expensive affair before.”

StashAway invests using a proprietary investment strategy called the Economic

Regime-based Asset Allocation, which gives exposure to 19 asset classes through global ETFs. The system automatically rebalances the portfolio to help investors meet their goals.

According to its website, StashAway’s portfolios are designed to achieve average net returns of between 3.8% and 9% over the medium to long term. There is no minimum investment amount or fees to set up an account or withdraw funds. The annual management fee ranges from 0.2% to 0.8% of the amount invested. Investors can withdraw their funds at any time.  

StashAway uses the same investment framework and portfolio of ETFs in Singapore and Malaysia. The only difference is that Malaysian investors are only able to invest and withdraw funds in ringgit, whereas Singaporean investors can do so in US and Singapore dollars.

“Operationally, having to maintain a multi-currency account was a bit too expensive for us. Even in Singapore, the firm accepts US dollars with a minimum amount of US$10,000,” says Wong.

StashAway has no plans to add other currencies to the Malaysian app, but it is considering expanding its pool of US-listed ETFs with global exposure in the portfolios. The ETFs in its portfolios are chosen from three of the biggest global ETF providers: BlackRock, State Street and Vanguard.

“We are not tied to any of these providers nor do they give us commissions or kickbacks. It is just that they are the largest, most liquid and cheapest providers,” says Wong.

StashAway has an automated process to rebalance portfolios daily to ensure that the actual and target weightage of each asset class in the portfolio is equal. “For example, if you are supposed to get 5% in gold and the market price for the metal has depreciated to, say, 4% of your portfolio, the system will rebalance it back to 5% so that the risk level of the entire portfolio remains the same,” he says.

But each allocation has a 20% margin to grow or fall before the system rebalances. “For example, if the asset with 5% allocation grows to 5.5%, it won’t be brought back down because there may be upward momentum that causes the asset to appreciate. If you take gains too early, you may lose out,” says Wong.

When economic conditions change, there will be a re-optimisation process that adjusts the asset allocations. For instance, the allocation may be more defensive in nature during a recession. This process is automated and scheduled to occur according to economic cycles. However, investors can choose to opt out of this process.

“These cycles take three to six or seven years to occur. For example, we have not changed economic regimes since the last financial crisis. These economic cycles are very persistent and the trends are very long,” says Wong.

In his view, investing through robo-advisory platforms such as StashAway is less risky than some options because there is diversification of asset classes and global exposure. Investors can adjust their risk profiles at any time, which will change the allocation of asset classes in their portfolios. There is a total of 31 portfolios in the system to cater for different risk levels.

“The investor can toggle between the different portfolios available on a risk curve so they can ultimately choose which portfolio they want. They cannot include or exclude individual ETFs because that will make the overall portfolio less efficient as they will be taking on the same amount of risk for potentially less returns,” says Wong.

StashAway’s system is mostly passive as both the rebalancing and re-optimisation processes are automated. However, the re-

optimisation process can be considered a form of active management, says Wong.

“It depends on how you define active or passive investing. If active investing means that a human is involved, then yes, it is passive as there is no human involvement [in our process]. There are just the humans on the investment committee involved in reviewing the changes,” he adds.

“But I define active investment as any strategic changes to your portfolio. When your asset allocation changes, that is quite active because you are making a very conscious decision to be more protective in a recessionary environment. At that point in time, when the allocation changes, it becomes active and then it goes back to being passive.”

As StashAway is regulated by the SC in Malaysia and MAS in Singapore, it is subject to periodical IT infrastructure audits, according to Wong. Independent parties conduct the penetration testing and audits. “Our data is stored with Amazon Web Services, which is the biggest cloud provider in the world, so you are secure,” he says.

The firm’s trustee is Pacific Trustees while its custodian bank is Citibank. In the event of bankruptcy, investors will go through an orderly process to claim their assets. The underlying securities are held in Singapore and can be brought back while its cash holdings are kept in Citibank Malaysia.

Earlier this month, Mohd Shahazwan Mohd Harris, former executive director of investments at Khazanah and corporate adviser to Singapore sovereign wealth fund Temasek Holdings, joined StashAway’s advisory committee.

StashAway currently has five members on its advisory committee, which oversees both the Singaporean and Malaysian operations. According to Wong, the members were chosen for their expertise. For instance, Pranay Gupta, the former head of multi-asset strategies at Temasek’s Fullerton Fund Management, assists CIO Lim in creating the investment framework.

“Shahazwan helps us with business development and advice on how to grow and expand in Malaysia because he is a great problem solver and has a lot of corporate investment experience,” says Wong.

Cultivating healthy habits

StashAway country manager for Malaysia Wong Wai Ken’s career decisions can be traced back to his life experiences. He grew up in a middle-class family in Malaysia, with parents who were determined to see their children succeed. When he was 16, his parents sent him and his siblings to Australia for their studies.

“It was part of the family’s plans to set up their children for success. My mum was a teacher, so she really emphasised the value of education. And for us to get ahead, she knew we had to study overseas, even if it meant migrating to Australia when we were still in high school,” says Wong.

His mother also emphasised the habit of saving and investing when he was growing up. “My mum was a teacher turned unit trust consultant while my dad was in property development. Even when I was young, my mum said it was very important to invest because the more you invest earlier, the sooner you will reach your goals and the less you will have to put aside each year,” he says.

His mother started by investing his ang pow money every year in unit trusts.

By the time Wong got to university, he realised that he needed to stand out from the crowd if he wanted to succeed, especially as an investment banker. “It was being part of a big lecture hall with hundreds of students whom you knew were smarter than you. You just needed an edge. It is like when you go to Australia, you have this immigrant mindset that you need to be very good to fit in,” he says.

This led him to work in accounting and analyst roles during the day and take night classes at university. He led this hectic lifestyle to ensure that he would graduate with work experience.

“The way I got some of my jobs was that I would show up in class in the evenings, see someone in a suit and ask if he or she was already working. They would say, ‘Yes, I work in this firm during the day. We are expanding, so why don’t you interview with us?’ It was about being opportunistic, curious and balancing work and studies,” says Wong.

This experience helped him to land a job at Khazanah Nasional Bhd and later at Affin Hwang Capital, where he played a role in the post-merger integration between Affin Holdings Bhd and Hwang Investment Bank in 2014, when he was only 26. He also took part in landmark transactions such as the initial public offering of Serba Dinamik Bhd.

Definition of success

Wong believes that your career is your most important asset as it is your wealth generator as you can use it to stand out from the crowd and demonstrate your skills. “My career is where I can earn the most and where I can spend a lot of time generating more income than my peers. To me, the focus should be on your skills so that you can do well at your job and advance your career quickly to generate more wealth,” he says.

“After that, with what little time you have, make sure you save and invest in things that you understand. It is as simple as that. It is not about finding get-rich-quick schemes or new wealth fads. It is about working hard and being recognised for your skills.”

Wong says wealth is something that should be based on one’s personal financial needs and goals. Once you are financially secure, there should be more focus on other things such as hobbies and time with the family, he adds.

“To me, success is doing what I love to do with the people I enjoy being with because there is no point getting to the peak and admiring the view by yourself. You have to bring people along with you,” says Wong.

He got married in May so he has been making financial plans to raise a family, pay down debts such as his mortgage, and prepare a retirement fund. This new stage of life also means he cannot afford to make risky career decisions. This translated into not taking a pay cut when he changed careers, even though working for a new company meant a heavy workload.

“To me, being in a start-up has slightly more security risk. So, for the younger ones who want to work in start-ups, it is really important to look at the entire package, from your remuneration to your shares. I recently got married so I could not take the risk of joining a pure start-up,” says Wong.

Investing and saving habits

He sets aside 30% to 40% of his monthly income to invest for the long term. “I practise dollar cost averaging throughout the cycle because it is not money that I need to spend now. From what I have left from savings, I do not really penny pinch and count everything, although it is very important to do so. Personally, I find it a bit tedious, but it is something I am improving on. But I do take note of my spending habits,” he says.

His developed his views on investing from a young age. When he was just in high school, his mother would let him pick the funds he wanted exposure to.

“She would give me a menu and ask, ‘Do you want to invest in a Malaysian or regional fund?’ I understood that there are different choices and diversification is very important,” says Wong.

“When I started working at Khazanah and Affin Hwang, I understood the markets better and did not always want my money to be solely based in Malaysia. So, these regional funds made a lot of sense. Now, StashAway is here and it offers global exposure.”

The high cost of investing is another trend he has observed. When he was in high school, he invested through his mother, who is a unit trust consultant. When he was at Affin Hwang, he did not need to pay a sales fee to buy into the company’s unit trusts.

“That is not available to the man in the street. If I was a professional working for a conglomerate with no access to these products at a very cheap rate, I would probably have kept a lot of cash. So, when I found out about this job opportunity with StashAway and its product, I was sold. I want to invest in ETFs at a very low cost and get global exposure,” says Wong.

He jokes that being at StashAway poses a bit of a healthy competition with his mother’s business. “She gets it, but she may think it is positioned only for millennials. I think millennials will be the first adopters for sure. But over time, people in their thirties and forties will adopt the product as well. Hopefully by then, my mum would have retired.”

The changing wealth landscape

Recent reports by Accenture and Deloitte highlight how the millennial generation prefer technology platform solutions, forcing wealth managers globally to modify their services. Computer-generated recommendations, mobile platforms and self-directed investment portals are some of the common demands of millennials.

The market has responded, with start-ups such as StashAway offering technology-powered solutions. But Wong believes this does not change the process of wealth accumulation. It still requires the discipline of investing for the long term.

“I think it is about coming back to the basics and not being carried away by new wealth fads. The traditional tools of investing are still there, it is just that the way you access them is very different. They should experiment with different wealth technologies and fintech to see what is out there,” he says.

“For example, experiment with different e-wallets out there for cashback offers and rewards. In terms of investing, if stocks and real estate are not your thing, there are plenty of new alternatives such as StashAway, equity crowdfunding or peer-to-peer financing platforms.”

Ultimately, Wong believes there is no shortcut to wealth generation. “If you ask people how their investments in bitcoin went, I think they would be either very lucky or very unlucky [depending on whether they had holdings before the crash in prices]. That mania surrounding instant wealth is very dangerous and I believe long-term wealth accumulation is still the way to go. I think if you focus on investing what you have on products you understand that carry lower fees, it will take you a long way.”

Save by subscribing to us for your print and/or digital copy.

P/S: The Edge is also available on Apple's AppStore and Androids' Google Play.