Evolution in Action

The new financial landscape is pushing banks to digitise faster and Mark Chahwan, Co-founder and CEO, Sarwa expects to see more Robo-advisory players entering the market with the younger demographics of the offering growth opportunities.

At the beginning of 2022, there were six Robo Advisory platforms operating in GCC– CBD Investr, Derayah Smart, FinaMaze, Haseed Invest, NBK Capital SmartWealth, Sarwa – can we expect to see many more coming online in the near future?

As you know Sarwa was the first company in the region to receive the Innovation Testing License and to launch the robo-advisory service to young professionals back in February 2018. Today, Sarwa is the fastest growing investment platform with more than 100k users that trust us with their financial journey.

The future of wealth management in the region is changing rapidly alongside Consumer behavior especially with the new narratives that we have seen post pandemic. You see more and more adoption of online financial services and products.

Today’s clients are more mindful of fees, but also want to be in control of the options they have. That is why they are looking for apps that offer low cost, ease of use, intuitive interfaces, and investing options.

Generally speaking, with regulatory precedence and ease of business today, I believe you will continue to see more players penetrating the market. However, it is now about consolidation and offering the right services to the right segment. The expanding young generation of MENA offers many opportunities for growth, as long as companies know how to listen to their clients. Sarwa today for example, went from being only a robo-advisor, to becoming a one-stop-money management and investing platform that has hands-off investing, self-directed trading of stocks, ETFs as well as cryptocurrencies with fractional investing, free local transfers, watchlists, daily and weekly news, access to free education articles and videos, free workshops and many more products to come soon.

What is your view of digital financial advisory and the role it plays in managing portfolios?

Let us start with the basics. A big percentage of the population in the region still has their money sitting in savings accounts. While a savings account is good to have as an emergency fund, it is important to also put money to work for you and hedge against inflation. That extra money you have sitting in the bank is losing its value.

Financial advisors are professionals that help you make decisions about what you should do with your money and how to invest it. In today’s world, it is easy to open an account online and put your money to work for you within minutes. With apps like Sarwa, you also have all the information and the options in one place – you can access free education, through articles on the dos and don’ts, videos, free webinars, and workshop, all free of jargon. Digital financial advisory made smart investing easy, accessible and affordable.

Can Robo Advisory practically cater for more than just the HNWI and mass affluent sectors of society?

The use of smart algorithms and financial technology allowed for the democratization of investing and made it possible for anyone to start their journey towards long term wealth. It used to be that you needed wealth to create more wealth. Now if you have a steady income, and an emergency fund, you can easily start investing. Sarwa caters to everyone:  we have clients with $500 and we have clients with $5,000,000. The important thing is for you to start somewhere to build on that, one step at a time.

What impact has the development of Robo Advisory had on asset management and banking businesses?

Massive. Traditional banks and wealth advisors failed to cater to a younger segment that is looking for low cost, convenience and practicality. The young generation has a very high mobile penetration and is looking for practicality and convenience above all. You do not want to go drive somewhere, or take a cab, only to wait for hours to get someone to see you so they can take your money. Today, young professionals use apps for everything in their day-to-day life. Investing should not be any different.

Platforms like Sarwa make it super convenient. It takes a few minutes to answer a few questions, upload a couple of documents, take a selfie and you are all set. Technology can accomplish activities in a few seconds, which otherwise take hours and days, such as flagging anti-money laundering activities, doing the QA for any process you have in place and removing a lot of repetitive work. Before, the overhead and operational costs of traditional advisors was so high.

A big percentage of the industry was built around commissions with lack of transparency. This new landscape pushed companies to digitise faster, to listen to the market and to be more transparent.

Where particularly do Robo Advisors have advantages over human advisors, and vise-versa?

Robo-advisors generally mix the advantages of low management fees from passive management and the use of technology to lower cost while retaining the benefits of a personalized portfolio that fits the risk tolerance of financial goals of the client. With Robo advisory, you can:

  • Provide better performance. It removes the human emotion elements of trading that drastically harms the performance of a portfolio and decreases returns over the long run. Investments tend to outperform their investors. One of the reasons being investors tend to panic in downturns, and sell at low prices, and get greedy in upward markets, and buy at high prices. When it should be the opposite.
  • Provide a faster service, at the client’s convenience: They can sign up from the comfort of their couch and their phone, no time wasted on roads, and paperwork.
  • Cater to a wider customer base, at a lower cost. You also provide a better experience: clients have access to their own dashboard anytime.

One of the disadvantages of new robo platforms is that you do not have any lock-in periods and exit fees. It is both an advantage and a disadvantage. You can withdraw at any point in time, which can be a bad thing to do if you have not reached your goals. With traditional advisors, you pay exit fees and penalties, which can protect you from yourself sometimes.

That said, it does not have to be an either-or answer. It is not about completely removing the human element, but about making it more efficient, and more cost effective.

Relationships building is still important. In today’s world, you still need both, that is why we at Sarwa have a hybrid model – technology to optimize and be more efficient; the human touch because we are human after all, and our clients need to know we are there. Our clients have the support needed from our customer excellence team right in their hands.

Ultimately it is about doing what is best for our clients and our community, which is the only way to succeed as a business.