When global stocks started to fall in February last year due to news about the impact of the Covid-19 pandemic, social media and online discussion boards were flooded with questions and comments from anxious retail investors, including retirees.
To address common concerns, the founding team of Endowus quickly put together a series of educational webinars to help Singaporeans understand the volatile nature of financial markets. Through the webinars hosted on YouTube, investors learnt about market risks, the importance of having a well-diversified portfolio and the difference between speculating and investing, says chief executive Gregory Van.
As demand for these sessions grew, the founding team, whose members previously worked for global banks such as UBS, Morgan Stanley and Goldman Sachs, tapped into their network. They engaged fund managers, financial bloggers and experts to not just break down and explain advanced investing concepts, but also share insights and knowledge with investors of varying experience, from first-timers to veterans.
Many Singaporeans are looking for ways to supplement their income, save for retirement, grow their wealth and keep up with inflation. Yet, not everyone is equipped with sufficient financial knowledge to understand how to invest for long-term success, and livelihoods are at stake. Their nest eggs accumulated after years of hard work and disciplined saving will be eroded if they do not invest well for the future.
Focusing on financial education
“We sought to prioritise education first, rather than the immediate gratification from markets,” says Mr Van. “Many cannot tell the difference between investing and speculating. This is very dangerous to financial, emotional and social wellness, not only for an individual, but for the community.”
With rapid digitisation amid Covid-19, many more Singaporeans are opening trading accounts. While an experienced trader would have a better understanding of the risks, new investors young and old risk losing huge sums that could gravely impact their retirement savings.
“We are trying to make a difference by helping people understand the world of investing and personal finance. It is about growing wealth towards your goals with the right expectations, and not about chasing hot tips on a stock to buy today and sell tomorrow,” says Mr Van.
Endowus emphasises having a holistic, long-term investment strategy across all your wealth, including cash, Central Provident Fund (CPF) and Supplementary Retirement Scheme (SRS) savings.
“We advocate a scientific approach to markets that does not require us to try to time or outguess the markets. It is about setting goals and having efficient diversified portfolios that are at a risk level suitable for each of these life goals,” adds the 32-year-old CEO. The company’s formation was born out of the founding members’ desire to find a better way of investing for themselves and their own families, with institutional- quality advice and access to products at low and fair fees.
Lowering barriers to investing
While seeking investments for his own family, Mr Van, a father of two young children, came to experience two big frustrations faced by retail investors. Firstly, they do not have access to the same low-cost fund opportunities as institutional investors. In other words, they are missing out due to not having as much to invest, as compared to wealthier investors, leading to reduced chances for success.
Secondly, trailer fees are a concern because such fees could lead to unethical practices whereby retail investors are offered wealth products from which investment advisors and platforms can make the most money. Or, in other words, a conflict of interest that reduces the retail investor’s chances for success.
Mr Van says Endowus set out to solve three problems: How to give systematic institutional-quality advice at scale, how to provide access to financial products that are not misaligned with investors’ financial goals, and how to overcome the first two hurdles at a fair cost that is transparent to everyone.
Catering to retirement needs
With these tenets in mind, the founders have built Endowus with a strong focus on long-term wealth generation that meets retirement needs. It is a fee-only company, meaning it charges only its investor clients, and is therefore not beholden to any product providers. Endowus also leads the industry in providing 100 per cent trailer fee rebates to its clients, further ensuring alignment with clients’ needs, while also lowering the cost of investing to ensure performance is not compromised by high fees.
“We have identified retirement as the generational challenge for this era, and maximising your CPF savings is key to addressing this issue. Hence, we have tailored the platform to CPF members’ needs by making sure it is at the lowest possible cost and globally diversified with access to passive index funds,” says Mr Van. Endowus was designated as the only digital investment adviser for the CPF and SRS in 2019. While CPF is Singapore’s mandatory social security scheme, SRS is a voluntary savings scheme that complements the CPF scheme to help Singaporeans prepare for retirement.
The company has so far helped close to four in 10 of its clients invest holistically across multiple sources of their wealth – cash, CPF and SRS – on the Endowus platform, and also helped new investors get started confidently with a low $1,000 minimum. According to the CPF Board Annual Report 2020, one in three Singaporeans was unable to set aside his or her Full Retirement Sum, which was $181,000 for those who turn 55 in 2020. Endowus hopes to support those requiring help to bridge the gap in their retirement goals.
Data for the financial year from October 2019 to September 2020, for example, indicated that one in two who use CPF to invest either made losses or earned less than if they had just left their money in the Ordinary Account. The same amount of money would have earned 2.5 per cent annual interest. Endowus reported that its CPF balanced portfolio of diversified stocks and bond funds returned 8.65 per cent during this period despite Covid-19 market volatility.
All forms of investment carry risks. This is why raising financial literacy standards will help Singaporeans better manage their finances and make their savings work harder to meet their retirement needs. Even as Singapore’s population ages, advances in technology in the fintech and private wealth sector have levelled the playing field for investors. Transaction charges have fallen too, benefitting the end user.
“Being in the tech space and a professional experienced in global financial markets, I have seen how wealth tech can transform the investment experience and bring about long-term positive outcomes. Better investing means people can live easier today and be better prepared for the future and retirement. It is more than just money. The societal impact and happiness this can deliver is priceless,” says Mr Van.