Complex Made Simple

Exclusive: UAE’s digital wealth manager StashAway reveals smartest cash and investment strategies

StashAway, Southeast Asia’s largest and fastest-growing digital wealth manager, officially launched in the DIFC this November. Is it the right time to increase your net worth?

With Robo-advising, the sophistication is kept behind the scenes, keeping things simple for the end-user Robo-advising is about your risk tolerance and how it ties in with your objectives Investors can use a mobile or web app and set up an account within a few minutes

Ramzi Khleif“No minimum balance, no hidden fees, but let us first provide you with the financial education you need to invest,” said StashAway MENA’s GM, Ramzi Khleif in an exclusive with AMEinfo.

StashAway, Southeast Asia’s largest and fastest-growing digital wealth manager, officially launched in the Dubai International Financial Centre (DIFC) this November. 

The company has globally, and since 2017, been experiencing assets under management (AUM) growth reaching 330% year-on-year, with more than 100,000 people of 174 nationalities living in 145 countries building their wealth with it.

Let’s begin by seeing how Robo-advising works.

The rationale for digital wealth management    

Digital wealth management is more accessible, and affordable because of the automation and built-in optimization that allow easier access to sophisticated investment frameworks that the average person typically wouldn’t have access to. 

“If you’re going into the bigger private banks, the financial planners, and wealth managers, they typically have higher minimum values that you have to invest in, not to mention entry and exit fees,” started Khleif. 

“It’s how people today like interacting, but they still need that human interaction, to pick up the phone, seek answers, especially if they see something they’re not comfortable with when markets react, which we accommodate.” 

With digital wealth management, the sophistication is kept behind the scenes, keeping things simple for the end-user. 

“You don’t want to open the interface and platform and be overwhelmed about what to do,” said Khleif.

Read: Robo-advising in the UAE: Wealth management is now for everyone

How does StashAway work?

Based on the information that clients provide, including family size, income, age group, objectives, and goals they are saving for, StashAway recommends specific risk profiles having a diversified portfolio of global assets. 

“You’re not, as an end-user on StashAway, choosing to invest in US equities, or emerging market equities, in more gold or less gold.   It’s about your risk tolerance and how it ties in with your objectives that will prove to be the determining factor,” said Khleif.

For example, if you are planning on retiring in 20 and 30 years, you will have a higher risk tolerance than if you want to buy a car in say 2 years.

“The reason being you can take a riskier portfolio long term and sit out those ups and downs which naturally will happen, but if your short term goal is to buy a car, you can’t risk being down 20%,” explained Khleif.

First: Financial education

When it comes to financial investing know-how and Robo-advising, the Middle East is generally behind other markets like the US, Europe or even Asia.

“Stocks, stock options, derivatives, ETFs, equities, gold, and other investment vehicles may be intimidating for the average person lacking proper knowledge about them, and so our initial job here is to educate and simply,” said Khleif.

Then, based on your risk tolerance and objectives, it’s the job of the Robo-adviser to automatically find the right solutions for you and manage them. 

StashAway uses Exchange Traded Funds (ETFs) covering diversified portfolios because they spread the risk over different assets and baskets and provide a high level of liquidity and robust tracking mechanisms. 

“We have the in-app academy where the basics of investing and financial planning are explained, leading to more intermediate and advanced topics. You have bite-size videos that explain everything in laymen’s terms and one can attend online webinars and interact with our speakers and financial advisors,” said Khleif.

Also, as part of their efforts to spread financial knowledge, StashAway offers employers a Financial Wellness Program; part of their “Workplace” initiative; that is designed to support their employees with the financial acumen necessary to make empowering short-term and long-term financial decisions. 

The program is completely free, and the aim behind it is simply to educate people on the importance of investing and how to best manage their savings. This initiative is also designed to improve employers’ existing benefit schemes that also meet company needs.

Read: B2C, B2B asset management and Robo-advisory in the region

Can you join?   

“There is a lot of cash sitting idle, in banks, and limited local offering, so a lot of people have to invest internationally which carries a lot of transactional costs,” started Khleif. 

The UAE is the wealthiest country in the Middle East with a total wealth of around $825 billion.  

Around 45% of the MENA region’s wealth is cash deposits in banks, a percentage that has changed little since 2013. 

This cash belongs to individuals and people with wealth. 

“If the average user has $10 in their portfolio, obviously that’s not going to make sense for us on its own. So we are looking for a mix of retail and high net worth individuals.”

And with StashAway, there is no “fine print”, nasty surprises, and other gimmicks.

“We just have one transparent management fee that ranges from 0.8% for funds under $25,000 and it reduces to 0.2% once your portfolio is over $1 million. And that’s on the general portfolio we are investing,” said Khleif.

“We also have a cash management solution that earns 1.2% on the Dirham, but we don’t charge any fees on that part of the portfolio.”

Investors can use a mobile or web app and set up an account within a few minutes. 

“We use goal-based investing, be it for a car, house, or retirement, where we ask specific questions that identify what you need to achieve your goals within your risk tolerance,” said Khleif. 

“We might say that your goals are unrealistic and then work around it. You can also reduce the risk of your portfolio at any time and start a new goal.” 

Is StashAway regulated?

“We are regulated by the DFSA and being in the DIFC means we adhere to stringent data protection laws, so your data is also very secure against attacks and hacks. In terms of client investments, they are held and secured in a custodian account structure.”  

Is Bitcoin a portfolio asset in StashAway? 

“Bitcoin and cryptos, in general, are interesting asset classes that we continually look at but which also carry such high volatility that, currently, we are excluding them from our portfolios,” said Khleif. 

“The idea for us is to optimize your risk-return profile, and today, our view is that the risk is too high to justify cryptos being part of it at this moment.” 

StashAway’s portfolios are all ETF-based and fall into the categories of equities, bonds, commodities, and Real Estate Investment Trusts (REITs).

“We have 12 different risk indexes and each one corresponds to a specific portfolio and each of these portfolios has between 7-12 ETFs. We look at over 30 different ETF types and these ETFs can be anything from US tech, China tech, small market equities, emerging equities, bonds, and others,” indicated Khleif.

Is it the right time to invest?

There are so many factors today impacting investments, including COVID-19 and upcoming vaccines, looming recessions, US elections, government stimulus packages, rising global debt, low oil prices, currency devaluations, regional security crises, and more. 

“Let’s put it this way: It’s never the wrong time to invest should you follow certain principles. For example, you don’t invest 100% of your net worth in one day in the market,” said Khleif.

“We believe in dollar-cost averaging. Regardless of what’s going to happen today or tomorrow, in the long run historically markets recover.”   

Dollar-cost averaging is the practice of putting a fixed amount of money into an investment program at regular intervals regardless of fluctuating price levels of such securities.

“There will always be something impacting the market, so you need to filter out a lot of the noise. Building wealth depends on factors like time, risk tolerance, and investing the right way at the right frequency,” Khleif concluded.