Fintech giant Lufax to launch online investment platform in Singapore

Singapore

LUFAX, the world's second-largest fintech firm, is staking its claim beyond China, as the unit of Ping An Group plans to launch its first overseas online wealth management platform in Singapore targeting offshore mid-market retail investors.

Expected to launch by September this year, Lu International targets the burgeoning middle-class in Asia, in part by attracting them with competitive fee structures that will beat the typical 3-5 per cent upfront fees charged to retail investors today.

"There is a lot of space to be competitive," said Kit Wong, chief executive of Lu International that will be based out of Marina Bay Financial Centre, at a press briefing on Monday.

Without a need for physical distribution, Lu International could save about half of expenses borne by a traditional fund distributor, it has estimated. Broadly, the platform will offer both investments in funds present in Singapore as well as global funds, with the platform using facial recognition to register users online.

The fund distribution model allows Lufax to break down and sell a fraction of a fund at about US$5,000 per pop to each individual investor. Lu International already has a list of funds, but Mr Wong declined to cite a target for the number of funds to be offered on the platform, or a target for assets under management.

"We don't want to be a supermarket," said Mr Wong, adding that the platform would curate the fund offering according to demand. Demand is expected to come from offshore investors from China and Indonesia, where Mr Wong has been travelling to frequently in recent months.

At home, Lufax sells more than 3,500 fixed-income, money-market and mutual funds and insurance products from domestic banks and asset managers. As at end-December last year, its retail assets under management stood at 438 billion yuan (S$88.5 billion).

Speaking also at the press briefing, Lufax co-chairman and CEO Gregory Gibb said the platform will assess the risk profile of its registered investors and hide products that do not meet various investors' risk tolerance and suitability. Lufax judges the risk factor of products based on the level of transparency in the fund, and the level of volatility.

For example, funds may be structured to take in leverage. Lufax will also look at the underlying credit risk of the product, whether there is a clear cashflow, and whether the returns are fixed or floating.

Being transparent about risk is critical to such an online wealth management platform, which already offers a profitable business for Lufax in China. "(We) don't have a sales force - the sales force is a four-inch screen," said Mr Gibb, noting that investors are screened for their suitability based on online tests that they take.

Lu International chairman and former GIC president of special investments Teh Kok Peng told reporters the platform would be mindful that MAS is protective of such mass-affluent investors, who are shut out of access to private banks. Mr Gibb said one aim is to help such investors allocate funds to investments that are still lower in risk, but improve returns over bank deposits. The platform is also keen to tap on the emerging trend of infrastructure funds.

He noted that at this point, Lu International is not billed as a robo-adviser, since it does not yet automatically allocate investments to funds even as there is already an investment advisory element in its service.

Lu International has secured in-principle approval from the Monetary Authority of Singapore for its capital markets services licence, after engaging with the regulator for six months. "Singapore has a very mature regulatory framework," said Mr Gibb. "There's been real interest and willingness in looking at how technology can solve traditional problems."

Lufax's wider expansion into wealth management comes as it moves from peer-to-peer (p2p) lending amid expected regulatory scrutiny in China following a Ponzi scheme exposed at a smaller p2p competitor. Monthly p2p transactions now make up just 10 per cent of all transactions on the domestic platform today, said Mr Gibb. He declined to set a specific timeline for Lufax's IPO in Hong Kong.