Swapnil Mishra, formerly managing director at Deutsche Bank in Singapore, has been hired by Kristal.AI as head of private wealth, with a view to expanding its offering to HNW clients. Mishra spoke to Asian Private Banker about Kristal.AI’s position in private wealth management and the client traction of the business proposition.
A private banker with over two decades of industry experience, Mishra’s greatest driver to take the leap into a fintech startup has been the belief that bankers should embrace digital tools to better serve private clients.
“The idea of using technology in private wealth management is not about removing relationships,” said Mishra. “By interacting on an app, RMs can have a better understanding of their clients as data is created and analysed. This can improve the efficiency of RMs and their engagement with the clients through personalisation.”
While many private banks have made progress in serving clients with digital tools over the past few years, Mishra finds working at a purely digital platform is simpler as there are no legacy issues and — unlike what may happen at traditional private banks — there is no internal competition with other streams of services.
“Including me, we currently have six RMs and we are considering hiring more to scale the business. Unlike traditional private banking businesses, we can acquire clients through both the RMs’ network and the digital acquisition channel, and the latter is actively working now,” he said.
“Our tools and tech enable each of our RM to engage with hundreds of affluent customers digitally, versus no more than 25-30 HNWs for a traditional RM. Our tools are like the Iron Man suit to our Tony Starks!”
As an online investment advisor, Kristal.AI provides both wealth management and asset management services. The platform has the ability to aggregate the data from different private banks and run the algorithm over the aggregated assets to generate advice.
“In a way, this service complements the existing CIO views. We hope that this can work as an additional insight we provide to our HNW clients,” he said.
Performance underpinned by algorithms
The Growth ETFs strategy created by Kristal.AI comprises 100% equity. It had gained 59.7% YoY by the end of 2019, beating the benchmark S&P 500 which gained just 31.1% over the same period. Katalyst, an ETF basket holding 50% equities (the iShares MSCI All Country World Index ETF) and 50% fixed-income (the iShares iBoxx USD Investment Grade Corporate Bond ETF) was up 23.71% over the same period. Both Growth ETFs and Katalyst are available only to private clients.
“Our algorithm uses both traditional and behavioural finance theories. So allocation is based on diversification and volatility as well, over and above returns,” Mishra explained. He provided an example: the unhappiness experienced by an investor after a loss has an impact on the algorithm output. Different from offering a standard portfolio for all investors categorised in the same risk appetite bracket, the algorithm will offer a different recommendation to an aggressive investor at Kristal.AI with a lower risk appetite.
“Many of our existing clients are working in the tech industry, probably as they are more familiar with the technology,” he said. “We also have clients who are senior professionals in the finance sector — and of course quite some investors from the retail segment just because the application is free for investments under US$50,000. All these segments value that we bring unparalleled access at a competitive price.”
Since June 2019, the firm has seen traction from clients with US$1 million to US$3 million in investable assets. Mishra adds that the stream of HNW clients has increased as the firm’s private wealth proposition builds up. Kristal.AI had AUM of US$110 million by January 2020, growing close to four-fold from the base of US$26 million in December 2018.
The firm has a capital markets services (CMS) licence issued by the Monetary Authority of Singapore and has Type 4 and Type 9 licences from the Securities and Futures Commission in Hong Kong. Mishra said that the firm does not intend to apply for a digital banking licence in Singapore, as the firm is working well with custodian banks and is using Interactive Brokers as its custodian.