What are the implications of investing in fractional shares when a roboadvisor closes down?

Similar to Smartly who shutdown last year, your holdings in both Syfe and StashAway are comingled in their respective custodian accounts.

For Syfe (https://www.syfe.com/security), your deposit is held in DBS Trust Account, your assets in Saxo (with securities in Citibank and uninvested cash in HSBC),

Similarly, StashAway (https://www.stashaway.sg/faq/115003747047-what-...) also holds your deposit in DBS and assets in Saxo or Lion Global.

In other words, you are not the direct owners of the assets (ETFs or stocks) in your portfolio, but it is the custodian that owns all the assets and allocates your portion to you in their ledger.

So when roboadvisors go bust, the money in the trust account and the portion of your holdings in the custodian accounts are safe. The whole asset in the custodian account will be liquidated and the proceeds will be distributed to you according to your proportion.

I'm not entirely sure on this, but I would assume that the fractional shares would likely be liquidated and returned in cash.

As to whether Syfe or Stashaway will continue to be in business, it's hard to make such predictions especially with roboadvisor Smartly shutting just last year.

With that said, Syfe has announced in Septemeber last year that their AUM has increased tenfold in 2020 alone. Moreover, Stashaway has also publcily announced that their AUM has surpassed $1billion and saw a 300% growth in 2020. Of course, this is no guarantee of their longevity but I think it's a tad bit more reassuring when we see news like this.