Endowus enters Hong Kong, challenging commission biases in financial advisory

The digital wealth advisor offers a 100% rebate on all trailer commissions.

Financial agents in Hong Kong often follow a commission-based sales model which can lead to misaligned advice and limit investors’ access to products that actually align with their investment goals. This is what pushed Singapore-based wealthtech, Endowus, to step into the market.

“Investors often end up paying high fees and hidden commissions that eat into their returns, with limited access to products that fit their investment goals due to distributors being incentivised by trailer commissions,” Gregory Van, co-founder and CEO of Endowus, told Hong Kong Business.

The reality is that individual investors face limitations in obtaining high-quality investment solutions across public and private markets, whilst institutional investors typically receive better advice and products at a lower cost. And that’s the disparity being addressed by Endowus.

“Unbiased advice and fee savings do not only solve an individual Hong Konger’s pain point but can also positively impact the greater retirement adequacy issues facing the city by helping people save and invest better for their futures,” Van said.

Endowus presents a unique value proposition that addresses these pain points. “We charge a low, transparent, all-inclusive fee that covers everything from expert financial advice to execution and rebate 100% of all trailer commissions, an industry-first move that ensures alignment with our clients,” Van said.

The Endowus platform provides professional and personalised advice in line with the client’s unique goals and risk profile. They achieve this through combined digital solutions and human advisory services.

“We are also partnered with over 50 top global asset managers, curating more than 200 best-in-class funds for our clients to select from, covering various markets and asset classes,” Van said.

This strategy also allows Endowus to facilitate higher liquidity through select open-ended funds on the platform, reducing the barrier to accessing private markets and alternative investment solutions.

The firm’s Hong Kong expansion will focus on strategically expanding product offerings and solutions to help investors achieve near-term and long-term wealth management goals.

Providing another positive impact is Endowus’ move in reducing overall investment cost and improving returns for their clients.

Endowus’ Hong Kong-centred efforts

As revealed in the latest Endowus Insights Report, Hong Kong investors are described as “risk-seeking” with about 54% willing to take on higher levels of risk for greater returns.

Considering this, Endowus offers Hong Kong clients a vast selection of investment opportunities.

“Finance professionals have been very attracted to Endowus’ offering in Hong Kong covering straight-through institutional share-class access to funds across all asset classes and strategies, from money market funds to index funds, to active fixed income, to private equity and private credit, to hedge funds. Many of these strategies are exclusively available on Endowus at a lower cost and lower bite size than ever before,” Van said.

Endowus’ service is also localised to regulation and the availability of products and solutions in the Hong Kong market and maintains an evidence-based asset allocation advisory and fund curation process.

Offerings in Hong Kong are “doubled down,” following partnerships with global private equity giants such as iCapital, EQT, Carlyle, and Partners Group. The acquisition of Carret Private will also service ultra-high-net-worth clients.

“As our conflict-free business model is new to Hong Kong, Endowus places a lot of emphasis on financial literacy, educating investors about the pitfalls of loaded fees and hidden commissions that erode their returns and lead to misalignment between the client and platform. We need to empower them with the financial know-how to make informed investment decisions,” Van explained.

He said clients of the firm save US$40m (HK$312m) annually through its institutional share class access, 100% cashback on trailer commissions, and never charging subscription fees.

“Investors have absolute transparency and streamlined visualisations of their portfolios, their total wealth, and personalised advice that suits their goals and risk profile on one convenient digital platform,” Van added.

Underserved wealth management market

The Hong Kong market focuses on traditional wealth management exclusively for ultra-high net worth (UHNW) and family office spaces.

As Van observed, this situation leaves many early high net worth individuals and affluent investors with US$500,000 to US$5m (HK$3.9m to HK$39m) investable assets underserved and overlooked by private banks as they can only offer them cookie-cutter retail offerings and nothing more due to the high cost of servicing.

“Endowus is readily filling this retail wealth management gap making this market a massive opportunity for wealthtech firms to capture,” Van said.

“We have also reduced the barrier to accessing private markets and alternative investment solutions. By strategically engaging world-class alternative fund managers and onboarding them onto our platforms, we not only effectively reduce the minimums typically required by private banks, we also facilitate higher liquidity through select open-ended funds on the platform,” he added.

In addition to its Hong Kong agendas, Endowus seeks to integrate with Hong Kong’s Mandatory Provident Fund (MPF) System to encourage investors to manage their total assets from personal savings to their public pension funds designed for long-term retirement goals.

“Our larger goal is to solve a more far-reaching, societal challenge of retirement adequacy amidst a rapidly aging population across Asia,” Van said.

Van also shared that the company’s growth in the Hong Kong market will be furthered by its recent fundraising efforts which closed at $35m (HK$273m).

Outlook for 2024

In 2024, Endowus will be focusing on assisting investors in navigating market dynamics, in consideration of the current global geopolitical conflict.

“Endowus will provide timely and relevant insights in partnership with seasoned fund managers and experts. With the anticipation of economic slowdown and rate hikes, this continued financial literacy push will guide investors in positioning their portfolios effectively,” Van said.

He also believes that diversification across asset classes, geographies, and tailored solutions will cater to different risk profiles, goals, and preferences of investors, including strategies focused on ESG investing, retirement planning, and generating income.

Moreover, the launch of a full-service Endowus app is also expected by mid-2024. The app will allow Hong Kong clients to “experience the future of digital wealth management, personalised recommendations, and real-time updates in the palm of their hand.”

“Our unique, fee-only, conflict-free business model can fill the existing gaps in access to investment strategies and advice in the market, and meet the high expectations of sophisticated and digital savvy investors,” Van said.