What happen to our funds if the roboadvisor close down during bad recession and our invested value are at an all time low, will all the funds be sold or we still hold on to the ETF/funds invested? - Seedly
 

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Asked by Anonymous

Asked on 04 May 2019

What happen to our funds if the roboadvisor close down during bad recession and our invested value are at an all time low, will all the funds be sold or we still hold on to the ETF/funds invested?

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Dear Anonymous

Thank you for your question. Please allow me to answer it from MoneyOwl's perspective.

All investors' money are protected and held in trust's account under our custodian’s iFAST Financial Pte Ltd - Client Trust, which are subjected to MAS regulations. Even in the unlikely event that MoneyOwl closes down, your money is safe with the custodian. Taking it a step further, if in the unlikely event that iFAST ceases operations, your investment holdings held under custody with iFAST will not be affected as they will either be returned to the investors or transferred to another agent of your choice. iFAST has the responsibility to ensure that all liabilities and obligations to all clients have been fully discharged or provided for, and that proper arrangements have been put in place.

As for rebalancing, this is done irrespective of whether the robo is a going concern. At MoneyOwl, we believe that in order to have a good investment experience, one should stay invested for the long term. One way is to ensure that you remain invested in the portfolio that reflects the risks of asset allocation that you can accept. As such, regular rebalancing is done for all our clients at MoneyOwl. You can read more about how we manage your money here https://www.moneyowl.com.sg/#/faq

Also, we will be having our first investment symposium on the 25th May. You can sign up for the event here to find out more about how we manage your investments.

https://www.eventbrite.sg/e/moneyowl-investment-symposium-registration-60702740531

Hope this helps allay some concerns you might have.

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Assuming you mean a controlled closure (not some sudden liquidation event that leaves a legal message on who owns what) - even if you get liquidated on your holdings, presumably you could take the money and find another platform/channel to invest again into similar funds so sure admin hassle and some frictional costs but you wouldn't lose a ton of money.

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Sin Ting So
Sin Ting So, Head Of Client Experience at Endowus
Level 5. Genius
Answered on 24 May 2019

Dear Anonymous,

This is a great question and something that is important to consider when you are deciding between investment options.

Endowus has partnered with UOB Kay Hian, one of Asia's largest brokerage firms and backed by the UOB Group. UOB Kay Hian is licensed by MAS for custodial services, and subject to MAS regulations. When you open an account with Endowus, we will automatically open an account in your own name at UOB Kay Hian. This means that your assets and money are held separately from ours and always in your own name at UOB Kay Hian, our partner broker. You will always have full access and claim to your assets no matter what happens to Endowus, and you will hold on to your funds invested.

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Lim Boon Tat
Lim Boon Tat, Applied Mathematics at Brown University
Level 6. Master
Updated on 30 Jun 2019

Correct me if i'm wrong. In short, you will still hold on to the ETF invested. But based on what i know about most robo-advisors, they will probably auto-rebalance it such that the resultant mix still adheres to your chosen portfolio blend (e.g. 60/40 equities/bonds). A numerical example is perhaps more illustrative.

For example, if you have chosen a 60/40 mix, and have a 100k portfolio, the robo-advisor will invest 60k into equities/ETFs and 40k into bonds. As the economy tanks, generally the equities will fall sharper and faster than bonds, resulting in perhaps your portfolio becoming 30k equities (50% drop) and 30k bonds (25% drop): 60k total (note that this is the advantage of having some of your portfolio in bonds).

With 30k/30k, your mix is now 50/50, and the robo-advisor will rebalance and sell of some of your equities and buy more bonds.

Now one perspective, is that you're "locking-in" your losses by selling off your equities. However, another perspective is that you're (automatically) shifting your assests from a falling stone to a falling feather.

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Siow Nan
Siow Nan

30 Jun 2019

Shouldn’t the robo advisor be selling some bonds and buy more equities to rebalance the portfolio back to 60/40 instead?