Nguyen Mai Hong, who works for a furniture company in Vietnam’s capital city Hanoi, is a novice in investing. She started dabbling in stocks and bonds only recently after she was introduced to Finhay, one of the many wealth management platforms available in the country.
Twenty-six-year-old Nguyen wanted to grow her small savings. “I don’t have any experience in stock investing, so I put about 20 million dong [$870] into Finhay, which will use the money to invest in bonds and stocks. I was told the interest I can earn is much higher than bank interest rates,” she said.
Many young people like Nguyen, especially in the Gen Z cohort, are increasingly rushing to wealth management platforms as banks in Vietnam keep interest rates low to support businesses amid the COVID-19 pandemic. Being young, they do not have enough savings to explore other expensive assets like real estate. What they do have, however, is an appetite for risk and a knack for handling digital platforms.
In turn, the country’s wealthtech players are having their day in the sun.
“With the increase in digital adoption in Vietnam [due to COVID-induced restrictions], and a drop in interest rates, people are shying away from bank deposits. Retail investors’ participation in the capital market has increased manifold since the pandemic,” James Vuong, founder and CEO of Infina.vn, told DealStreetAsia in an interview.
Infina.vn, backed by 500 Startups Vietnam, is a real estate investment and wealth management app. It currently invests in products such as certificates of deposit (CDs) and mutual funds, enabling investors to diversify their portfolio. Infina.vn accepts investments as low as $25.
Its peer Finhay, which Nguyen uses, is a robo-advisor that, in April last year, raised an undisclosed sum in a funding round from Jeffrey Cruttenden, the co-founder of the American micro-investing platform Acorns, and Thien Viet Securities Company, among others. Finhay said it will use the latest funds to expand its market reach, optimise IT infrastructure, and recruit more talent. The startup will also invest in educating the public on investments.
In January 2019, Finhay raised a six-figure funding from Insignia Venture Partners and other investors, including Hong Kong-based Zeroth.ai and Rhombuz Ventures.
“We are just tapping the surface of the potential of the wealth management sector in Vietnam,” said Finhay founder and CEO Nghiem Xuan Huy.
Even the youngest of Vietnam’s wealth management platforms, Tikop, established in 2020, is witnessing notable growth. It was developed by TechLab, a subsidiary of Funtap, Vietnam’s top game developer. Funtap is backed by Makers Fund, a venture capital firm focused on the interactive entertainment industry and South Korean venture capital firm DT&Investment (DT&I), and Colopl Next, the corporate VC arm of the Japanese gaming company Colopl Inc.
Tikop clocked double-digit month-on-month user growth in Q1 2021, it said. Its total financial value under management also grew 50-fold in the March quarter, compared with the December quarter of 2020. First-time investors are one of the forces driving stock indices, assets, and crypto, according to Tran Hoang Manh, Tikop’s product director.
“While the major asset holders in Vietnam are the ‘7x generation’ [a local term for Gen X], they have been investing in real estate channels and this appetite remains unchanged. We believe that when the 9x and 10x generation [Gen Y and Gen Z respectively] has greater assets, the asset management industry in Vietnam will enter a super-growth cycle like many other countries,” said Nguyen Minh Hanh, portfolio manager at SSI Asset Management Co Ltd under SSI Securities JSC, the country’s second-largest brokerage.
He added that, in 2020-21, the number of new securities trading accounts at her firm has skyrocketed.
Given the growth, the sector may also witness increased competition. “There will be a race among digital and incumbent players alike to both expand the market and capture share,” said 500 Startups Vietnam general partner Eddie Thai.
Some of Vietnam's digital wealth management players
|Finhay||2017||Finhay is a robo-advisory fintech that helps millennials micro-invest in financial products. The system helps to identify the user risk profile and recommends appropriate asset allocation. The underlying assets are mutual funds from different fund managers, so that the risk is hedged. Behind the scenes, the product takes care of the process and mathematical calculations.||Jeffrey Cruttenden, co-founder of US savings app Acorns; Thien Viet Securities; H2 Ventures; Insignia Venture Partners|
|Algo Platform||2017||Algo Platform is a tool that allows investors to analyse Vietnam's stock market. It helps to find effective investment opportunities and provides timely advice to customers and investors. The platform supports the user in creating reports, provides technical and fundamental trading formulas, and observes real-time trading signals.|
|Entrade||2018||Owned by EnCapital, Entrade is a platform that enables investors to exchange their financial assets such as bonds, equities and valuable papers.|
|Infina||2018||Infina is an investment and savings platform owned by RealStake (RealStake Pte. Ltd). It now has multiple branches in Thailand and Vietnam. The company follows the model of a technology company to create breakthroughs that will benefit investors.||500 Startups and angels investors such as Neil MacGregor (Savills), Dinh Anh Huan (Seedcom),..|
|Stockbook||2019||Stockbook is an information portal that connects the investor community with an information platform providing in-depth analysis of stocks, bonds, and various types of investment assets, investment analysis reports from experts, and specialised investment communities.|
|Tikop||2020||Tikop is a project of Techlab, a subsidiary of Funtap. Tikop is a mobile-based wealth management platform that provides personal finance and invesment advisory services. Besides micro-savings products, Tikop will concentrate on promoting product packages for stock investment, fund certificates in open-end funds and ETFs, and fractional real estate invesment.|
Young people in the Gen Y and Gen Z cohort trying their hand in wealth management is a global phenomenon as the pandemic has pushed them to save money and invest more online.
Moreover, major global wealth managers have cut their stock-trading commissions and platform fees to zero. Most recently, Fidelity Investments in the US said it is launching fee-free investment services to teenagers in the country. In Indonesia, investment platforms such as Ajaib and Stockbit are attracting interest from new retail investors.
This has made the sector a prime target for investors.
In Southeast Asia, fintech startups dominated dealmaking activity in the first three months of this year, clocking 65 deals with at least $1.1 billion in total proceeds, according to DealStreetAsia’s SE Asia Deal Review: Q1 2021 report.
Within fintech, wealthtech was the most popular sub-category with a total of 15 deals recorded in the first quarter, followed by e-payment (13), insurtech (9) and P2P lending (6). Wealthtech firms raised $267 million in January-March 2021, while e-payment firms generated $393 million.
“I believe investing apps are attracting investors’ attention as democratising wealth management shows the scalability of a market that was previously constrained to a limited segment of HNWIs and institutions,” said Vuong of Infina.vn.
The Vietnam Fintech Report 2020 by Fintech Singapore and Switzerland Global Enterprises noted that there are 123 fintech startups in Vietnam. Of this, 75% is accounted for by five sectors — wealth management, payments, P2P lending, blockchain, and POS.
“With incumbent [wealth management platforms] lagging in wealth solutions, the market offers growth opportunities for new entrants,” according to KPMG’s recent Digital Wealth Management in Asia Pacific Report.
Legal hurdles and other challenges
Given that wealth management is an emerging sector it has certain challenges to overcome. They compete with conventional players like banks, for instance, and money will have to be spent to educate and expand the market. “Competitive differentiation can be elusive,” Thai of 500 Startups opined.
Fintech News Network founder Christian Konig pointed out that the investment flow will depend on the real estate market, which has given good returns historically. “Investments in mutual funds or ETFs are still relatively unknown in Vietnam. Moreover, the underlying indices are relatively not well-diversified, therefore we might see different instruments,” Konig said.
“As soon as real estate gets less attractive we will see a surge in alternative investments,” he emphasised.
However, a bigger hurdle is the lack of regulatory clarity.
Vietnam lacks regulations that sufficiently stimulate capital markets activity, leading to slower growth of the wealth management segment. Its fintech regulatory landscape is also in the early stages of development, according to experts.
Online platforms now primarily act as intermediaries for raising money and investing in existing funds in the market without a licence for asset management. Therefore, they serve as distribution channels for traditional funds.
Currently, there is controversy on whether fintechs and credit institutions can raise short-term capital from individual investors. Some experts pointed out that fintechs or securities companies raising capital from individual investors is against the law.
Most of the companies in the segment register as IT-related services firms rather than as financial services companies, according to Dang Thanh Son, a former partner at Baker & McKenzie and now a managing partner at the corporate law firm DNA Vietnam. “It is also uncertain if an online wealth management company can be owned by foreign investors. The government should have a clear regulation to resolve this issue in order to help startups attract more foreign investments,” he said.
Tikop’s Tran said that in a nascent market like Vietnam, customers’ reviews about online investment & wealth management platforms are still conservative.
The main challenge for startups in this field is that they only have a technical background in asset allocation. Such allocations are not based on an in-depth assessment of each allocated fund, and do not provide investors with a clear analysis of risks, profits, or clear correlation between returns and risks, said Nguyen from SSI.
“It is necessary to have a core system to evaluate each product in detail as well as to process the KYC thoroughly with an aim to identify each client’s risk appetite,” he added.
Nevertheless, the interest in the segment continues. “I think investors will be interested because of the huge market opportunity, just as in logistics and e-payments,” said Thai of 500 Startups.