Digital wealth platforms report growing AUM, but have yet to see profits

WEALTH management platforms saw a bump in their assets under management (AUM) in 2023, as new product rollouts attracted more commitments, mainly from existing clients.

“With every new product line over the past 12 months, we’ve seen an incremental uplift in AUM,” said Gregory Van, co-founder and chief executive officer, Endowus.

Michele Ferrario, co-founder and chief executive, StashAway, said: “We saw quite significant AUM growth, particularly in the second part of 2023.”

Endowus has said it now has over US$5 billion in AUM in Singapore and Hong Kong, while Syfe has over US$1 billion in AUM in Singapore alone. StashAway declined to disclose its current AUM, but crossed the US$1 billion threshold in 2021.

Current customers were the main driver of AUM growth for both Syfe and Stashaway, as they have been putting more money into the platforms.

Flight to safety

As interest rates remained high, customers started placing money into cash management products last year, said Dhruv Arora, founder and chief executive, Syfe, and its Cash+ Guaranteed product, a fixed deposit product, drew new customers.

“Our average user was somewhere between late 20s and 40s, but with the Cash+ Guaranteed, we started attracting users in their 50s and 60s as well,” he said.

The flight to safety by investors has led to platforms launching new solutions. Endowus launched offerings such as index funds by asset manager Amundi for Central Provident Fund savings.

All the platforms also rolled out more products for accredited investors – with financial assets exceeding S$1 million or an annual income of more than S$300,000 – such as hedge funds, venture capital funds, and angel investment syndicate investments.

The mass affluent segment, commonly defined as customers with at least S$250,000 in assets, is a key segment for all wealth management platforms.

But while players say business is growing, they have yet to show profitability, according to their most recent financial filings.

Financial filings for Endowus show revenue growing 151.5 per cent to S$8.3 million in 2022, from S$3.3 million in 2021, but losses also swelled 51.4 per cent to S$26.8 million from S$17.7 million in the same period.

StashAway’s revenue in 2022 rose 13.6 per cent to S$9.2 million from S$8.1 million in 2021, while its losses narrowed to S$27 million in 2022 from S$30.6 million in 2021.

Syfe shifted its financial year to end on Mar 31, and posted higher revenue for FY2023 at S$4.2 million, from S$2.5 million for FY2022, which comprised a 15-month period. Losses narrowed for FY2023 to S$9.9 million compared to S$21.1 million for the 15-month period of FY2022.

“Over the last two years, we’ve been more focused than we were before because the company’s reaching a maturity where it makes sense to focus on getting to profitability, and we’re not far away,” said StashAway’s Ferrario.

Syfe claims its Singapore business is on track to be profitable by 2024, with the broader business in Hong Kong and Australia achieving profitability within 2025.

Syfe also launched a brokerage business in January 2022, which has helped in providing another revenue stream. The platform’s brokerage business saw transaction volume peak in December 2023, hitting 50 per cent higher than the last peak in November 2023. Arora declined to disclose specifics on the transaction volume.

These different business lines have helped in building Syfe’s resiliency amid uncertainty and volatility in the market. The brokerage charges transaction fees rather than a percentage of a customer’s AUM.

Focus on existing markets

All the platforms are looking to concentrate on the markets they are already in, rather than looking to enter a new one in 2024.

StashAway will be doubling down in the five markets it operates in – Singapore, Malaysia, Thailand, Hong Kong and Dubai.

Syfe is looking to take what has worked in Singapore to its other markets in Hong Kong and Australia. Arora noted that there has been interest from larger financial institutions to partner up for their offerings.

“We had some interest from larger financial institutions regionally to enable their offerings in their markets, but for us the focus is these three markets and that will remain,” he said.

For Endowus, Hong Kong will take centre stage this year. “Our convictions about the need and demand for our service has only grown since we launched the platform in the region in mid-2023, as our first expansion market after our home base in Singapore,” said Van.