SEOUL -- Buoyed by successful settlement in its homeland, Fount, an asset management robo-advisor startup in South Korea, revealed an aggressive business strategy to tap into overseas markets through ties with Asian financial companies. Its founder showed confidence, promising to introduce optimized services to customers through more specific consultations.
Fount, founded by Kim Young-bin in 2015, offers a customized financial portfolio to each customer via machine learning technology and asset allocation algorithms. His robo-advisor engine calculates the optimum combination of assets by combining financial engineering technology with asset allocation theories. It allocates assets based on market changes through dynamic rebalancing.
"We will actively tap into overseas markets. We have already established a Hong Kong subsidiary to tap into the Chinese market," Kim said in an interview with Aju Business Daily. "In the future, we will expand our overseas business through joint ventures with Asian financial companies in China, Japan and Vietnam."
"The basic analysis will be left to artificial intelligence, but we will introduce optimized services to customers through more specific consultations," Kim said, pointing to growing interest in robo-advisors at a time when a COVID-19 pandemic invigorates non-face-to-face services across the world.
Robo-advisors provide financial advice or investment management online with moderate to minimal human intervention. They provide digital financial advice based on mathematical rules or algorithms designed by financial advisors, investment managers and data scientists. Robo-advice is considered a breakthrough in wealth management services, bringing services to a broader audience at lower cost.
Robo-advisors typically allocate a client's assets on the basis of risk preferences and desired target return. Clients can choose between offerings with passive asset allocation techniques or active asset management styles. While working at Boston Consulting Group, Kim thought about a solution for economic freedom and decided to set up Fount. Now, some 20 financial firms use Fount's robo-advisor solution, with its managed assets exceeding two trillion won ($1.74 billion) as of July.
Like Amazon, which succeeded by minimizing distribution margins, Kim seeks to minimize financial transaction fees. He thinks that robot advisors are favored by young individual investors, novice investors who have difficulty selecting investment stocks, and office workers who are unable to find time due to their busy work.
To prepare for retirement, which is the biggest problem in South Korea's rapidly aging society, it is advantageous to use a robo-advisor that can provide various asset management at low cost. Kim advocates generalized asset management services that had been limited to high-value asset managers.
"As the bank's zero interest rate becomes a reality, deposits can no longer generate profits," Kim said. "However, at times like this, steadily accumulating profits rather than making a big fortune at one stroke determines the success or failure of old-age earnings. It is necessary to make long-term plans for more than a decade."
The return on Fount's aggressive fund was 8.30 percent in the January-July period, compared to KOSPI's 3.76 percent. Rather than focusing on aggressive investment or high returns, Kim seeks stable long-term returns, constantly readjusting its portfolio in accordance with the analysis of stocks and bonds, real estate and liquidity in advanced and emerging economies. Fount analyzes 52,394 scenarios by combining 449 indicators from around the world.
Middle-aged people have accumulated considerable assets through the growth period of South Korea, but the younger generation is different as lifetime income is not keeping up with spending with interest rates going zero, Kim said. "In other words, it is difficult to prepare for retirement even if you work hard and save money. However, if people in their 20s and 30s continue to manage their assets early on, they are confident that they will be able to reach sufficient economic freedom after retirement."
"The magic of asset management is that when you see a certain amount of money growing, you're spending less," Kim said. "Recognizing that the amount of money you spend now will increase two to three times later on, you will be able to reach your economic goals by saving them."
Fount will launch a new entrusted service for individual customers in October to strengthen its business-to-consumer service, Kim said, adding it can manage entrusted assets by itself. Jim Rogers, one of the best-known investors in the world, has joined Fount as an investment advisor, thanks to his private relationship that began in 2006 when Kim was a college student who had traversed abroad by motorcycle. When persuaded to serve as an angel investor, Rogers initially refused, but he changed his mind lately.
(This story was based on an interview by Aju Business Daily reporter Kim Hyung-seok)
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