Opinion: In Japan, robo-advisors get buzzy, but struggle

Photo credit: chuckchee / 123RF Stock Photo.

Since early 2016, we have seen a rise in robo-advisors in Japan, with the launch of Money Design’s Theo and WealthNavi. Hong Kong-based 8 Securities launched their own robo-advisor service in the country even earlier.

Despite the fintech buzz, companies offering robo-advisor services are facing difficulties to win over clients and are looking for new ways to increase asset under management (AUM), a fund’s total market value of investments.

This chart shows the latest numbers for Theo, WealthNavi, and 8 Securities for AUM and number of accounts.

Source: JIAA.

Theo

This is currently the largest robo-advisor in Japan (measured by AUM) and has received around US$25 million (or 2.8 billion yen) in funding.

I’ve heard from people in the industry that investors are pressuring Theo, which may be why Tomoyukari Hirose stepped down as its president in March and instead was appointed vice chairman.

The expectations of hitting a higher AUM may have fuelled Money Design to launch “MyDC,” an individually-defined contribution service, in January using Theo’s algorithm.

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.

Results are 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 instead.

WealthNavi

WealthNavi has received at least US$19 million (2.1 billion yen) in funding so far and is currently the closest pure robo-advisor competitor to Theo.

As seen in the earlier chart, WealthNavi lags behind Theo—a strong incentive to publicly announce their business alliance with SBI Securities and Sumishin SBI Net Bank.

The partnership with SBI allows WealthNavi to provide its robo-advisor service to customers of SBI Securities. This will be a huge opportunity for WealthNavi, considering SBI Securities has around 3.6 million accounts.

8 Securities

Robo-advisor services in Japan