Finnomena shakes up Thai wealth management
Thai fintech startup Finnomena has launched a digital wealth management platform aimed at the mass market. It’s the sort of innovation that is sorely needed in Thailand. But will it work?
Thailand has an ageing problem.
By 2025, almost a quarter of its citizens will be 60 or over, according to the United Nations. More alarming, southeast Asia’s second-largest economy has a population of 69 million, and the vast majority of them will not have saved up enough for their old age.
That’s where Thai fintech startup Finnomena comes in. Back in 2016, the Bangkok-based firm launched an all-in-one digital wealth management platform aimed at the mass market. Using a combination of educational tools, wealth management advisory and easy access to financial products, Finnomena hopes to encourage a new generation of investors to build up their savings.
“We want to help people become financially independent,” says Jessada Sookdhis – or Jet, as he is known to his friends – a fresh-faced, 39-year-old former fund manager who is one of the co-founders of the business. “Only if they start investing today will they be able to stand on their own feet after retirement.”
It’s a business model that has found plenty of takers. As of the middle of July, when Asiamoney visits Finnomena’s cramped 21st floor office off busy Silom Road, the company claims to have Bt10 billion ($330 million) of funds under advisory management, more than three times the Bt3 billion figure reported at the end of 2017.
That may look like peanuts compared to the Bt561 billion ($17 billion) of assets managed by Phatra Securities, one of the leading names in the wealth management industry in Thailand, but while Phatra requires minimum assets of about $1 million, all you need is $30 to kickstart a wealth plan with Finnomena – although Sookdhis says his biggest corporate client has $20 million under advisory.
Only if people start investing today will they be able to stand on their own feet after retirement
Finnomena’s financial markets data and content platform now has about 25 million views a month, which Sookdhis explains is the number of scrolls on Finnomena’s app, website and social media platforms, including Line and Facebook.
“I want to see at least one million investors on our platform a decade from now,” he says. “We want to become the largest digital wealth management platform in Thailand, then southeast Asia.”
That sounds good. But although the numbers look promising, Finnomena still has to overcome difficulties ranging from its diminutive size to local demographics.
Sookdhis first spotted the opportunity for a ‘wealth tech’ company back in 2014.
“I was working as a fund manager analyzing companies and industries, when I noticed two mega-trends,” he says.
The first was a shift in the distribution channels of wealth products from bank branches to independent financial advisers, a system seen in most developed countries. The second trend was ‘Thai style’ digital disruption.
“In the past, it was not easy to acquire investment knowledge,” Sookdhis says. “But starting with the launch of the iPhone, everything changed. Now Thai people spend seven hours a day on the internet on their smartphones. So anyone can learn about financial planning and investment strategy.”
His timing was good. Mutual fund assets under management in Thailand have risen more than 20-fold from Bt200 billion in 2002 to Bt5 trillion today, as retail investors discovered they could earn higher returns from funds than from bank savings accounts. But this figure represents just one third of total bank deposits in the system, meaning there is still a long way to go.
Initially subscribers can sign up to Finnomena’s knowledge hub for free, using their smart phone. They immediately gain access to a combination of podcasts, live streaming, research reports and financial articles.
As a rule, Sookdhis says, it takes about five sessions before people feel comfortable enough to start their own account. Robo-advisers will then build up a ‘wealth path’ based on investors’ preferences, including their investment period, budget and risk level. This could include best-in-class real estate funds or technology funds from all over the world.
But Finnomena is not a fund management company. Rather it is a platform for buying and selling funds. As such, the firm makes its money by revenue-sharing with the asset managers. Sookdhis says Finnomena’s cut varies, and that the firm charges no additional fees to investors.
Sookdhis and his team are constantly adding new features to strengthen Finnomena’s appeal. Investors can take their pick from 1,000-odd funds managed by virtually every local asset management company and spanning the entire ‘global asset class’. Or they can construct portfolios through a crowd-sourcing platform based on investment strategies constructed by six well-known, local investment gurus who have been appointed by Finnomena.
Each guru has a different investment theme, be it an all-weather strategy portfolio dependent on prevailing stock market conditions or a global aggressive hybrid portfolio. Investors are notified of any changes to the guru’s investment strategy.
“Finnomena adds value and simplifies matters for the investor,” says Andrew Stotz, a former head of research at CLSA Thailand who is one of the investment gurus.
“It is a service that the country sorely needs,” he adds.
“I have known Jessada for 20-plus years,” Stotz says. “He is very expansive in his way of thinking. He identified a market that was ripe for the picking. Promoting the benefits of long-term investment to a broad segment of the population is his holy grail.”
Stotz himself is something of a star act, having been voted Asiamoney’s top banking analyst in 2008 and 2009. He has since gone on to set up A. Stotz Investment Research in Bangkok.
So how have the guru portfolios performed to date?
The results can best be described as mixed. Stotz’s All-Weather Strategy Portfolio has come out on top, giving a return of 10.3% since it was launched in March 2019.
Sookdhis is the first to admit that he never expected to be running his own fintech company. His original plan was to be a fund manager, taking after his role model, Bridgewater’s Ray Dalio.
Born in Bangkok to an Indonesian mother and Thai father, Sookdhis attended Thammasat University where he earned a bachelor’s degree in economics before going on to complete his master’s degree at Chulalongkorn University. His first job in 2002 was at Bank of Asia Asset Management, which was a member of the ABN Amro group. After three or four years, he moved to Ayudhya JF Asset Management, one of the largest mutual fund companies in Thailand, and in 2011, he became chief investment officer at CIMB-Principal Asset Management.
“I expected to spend my whole career as a CIO because I liked investment. It was a good job. It was everything I wanted,” he says.
So why throw in a dream job for an uncertain future with a bunch of techies?
“It was a difficult decision,” he laughs. “I am a father of three. I said to my wife: ‘I have an idea to establish the company. It’s a good business and it is beneficial to everyone’.”
On day one, Finnomena opened with a staff of five, including Chayanon Rakkanjanan, one of the co-founders who still works alongside Sookdhis. Nicknamed ‘Mr Messenger’, Chayanon is well-known for his expertise in financial analysis and reporting, as well as for his rich pool of contacts in the industry.
Why Mr Messenger?
“I guess because he was always the first to get the message out,” says Sookdhis. “We met through common interest: we both wrote about investment. I knew him from reading his work and he knew me from reading my work.”
So far, it appears to have been a successful partnership. Finnomena now employs 125 staff; Sookdhis says this is likely to increase to 140 by the end of next year.
By the standards of many regional fintechs, Finnomena is small. Its latest Series B funding (second-round funding through investment, including private equity and venture capital) raised $10 million in January from investors including Openspace Ventures and Gobi Partners. This followed a Series A fund-raising back in September 2017 of $3.2 million, led by Krungsri Finnovate, a venture capital subsidiary of Thailand’s Bank of Ayudhya.
How tough was it to raise the funds?
“Actually every round is tough” says Sookdhis. “I had to pitch to 50 or 60 venture capital firms for meetings. So long as we do not expand overseas, our funding will be enough to scale our business.”
Then the inevitable question that most fintech companies hate to answer. Is Finnomena profitable?
“We expect to become profitable some time next year,” says Sookdhis.
Obstacles to success
If Finnomena can succeed, it would be good news in a country where fintech success stories have been relatively few and far between.
“When we started up four years ago, there were about 50 fintech companies in Thailand. Now there are around 200,” says Sookdhis who served as the founding president of the Thai Fintech Association.
Korn Chatikavanij, the respected former finance minister who is now leader of the Kla (Bold) political party, was the founding chairman of the Thai Fintech Association.
But despite the formidable efforts of both Korn and Sookdhis, Thailand’s fintech industry has yet to deliver a single unicorn with a price tag over $1 billion.
Just compare the numbers to Singapore which has about 750 fintech startups and five unicorns, including Grab and Lazada. Or take a look at Indonesia, which has six unicorns, including household names such as Gojek, the ride-hailing firm, and Traveloka, the online travel agent.
Thai startups and fintechs might be challenged for talent
Even Vietnam boasts one unicorn in the form of VinaGame, an e-commerce, social networking and game business. So why has Thailand fallen short?
A World Bank report published in July 2019 says that “much more could be done to leverage the potential of fintech innovations,” and cites multiple difficulties for fintech firms in Thailand including “inadequate public funding, a shortage of skilled workers, and regulatory obstacles.”
“Thai startups and fintechs might be challenged here for talent,” says Chris Suradejvibul, a partner at PwC in Bangkok. “Banks really do absorb significant entrepreneurial talent into their in-house or joint venture tech development. Moreover, banks get into many activities that are not directly related to financial services like, for example, Siam Commercial Bank launching a food delivery app.”
“I don’t want to blame a lack of government support because this is the normal excuse,” says Sookdhis.
But he does see the need for a stronger legal framework as well as a more supportive startup environment: “In Singapore, many fintech CEOs are ex-bankers. But in Thailand, I don’t see a lot of experienced bankers jump ship. It is generally the new-generation people with dreams and passion who set up fintech companies. But how can you know the customer, if you don’t have the experience?”
The biggest issue for Finnomena – and indeed for the whole of Thailand – is demographics.
“It’s very serious,” says Sookdhis. “Out of 33 million people working in Thailand only around 1.5 million have mutual funds’ investment accounts. That’s around 5% of the workforce, compared with more than 20% in Malaysia.”
Worse still, Sookdhis and his team estimate that 75% of ageing Thai citizens will not have sufficient funds to retire.
For those who do not have a pension, the government pays a monthly national elderly welfare allowance of Bt600 (just under $20) to citizens aged between 60 and 69 years, and a sliding scale of Bt700 to Bt1,000 for people aged 70 or above. But that is barely enough to buy a sack of rice, let alone to support them in retirement.
And only 1.7 million people out of the total population receive civil servant state pensions.
All the more surprising that so few people appear to be aware of the looming threat.
“The level of ignorance is simply astounding,” says one finance chief. “The economics of the ageing population is a train wreck that the authorities continue to wish away.”
Much of the blame can be pinned on Thailand’s political merry-go-round. The country has seen 12 prime ministers, 4 constitutions and 2 military coups since the start of 2000. The result has been a mountain of unresolved structural issues. Lack of funds to support retirement is just one of them.
“Coalition governments only focus on short-term problems,” says Kongkiat Opaswongkarn, chief executive of securities house Asia Plus Group. “They ignore the bigger picture. How can Thailand support an ageing population in the future? This is going to snowball.”
There could be worse to come. A report by Siam Commercial Bank warns that the state welfare scheme may become “undependable” in the face of a fast ageing population, insufficient funding and fewer people of working age.
“Who will top up the Social Security Fund when the money runs out?” asks one finance executive who has studied the issue at length. “In a perfect world, you would have a superannuation fund like in Australia or a Central Provident Fund like Singapore. We are already very late in this game, but the authorities have to do something.”
Could Finnomena be a part of the solution until the government gets its act together? One of the most obvious problems is that to invest, you still need to have savings. And in the case of Thailand, household debt accounts for 80% of GDP, one of the highest levels in Asia, while many workers are paid a minimum wage.
“If Finnomena can make this work [by encouraging the mass market to invest for the long term], it would be fantastic. But I am not sure they can,” says the foreign head of a securities firm. “They are competing with the banks. The capital markets are not functioning in the way that they should. And the market is tiny.”
Sookdhis points out that it is easy to underestimate the amount of funds available to firms like Finnomena.
“Every month, around 20 million people spend at least Bt100 each buying lottery tickets, so there is money out there,” he says.
Of course there are plenty of other challenges, not least the Covid-19 pandemic.
During the initial stages of the pandemic, many local investors panicked and pulled funds from asset managers. As a result, Finnomena’s assets under advisory management tumbled by close to a third in March, from Bt9 billion to about Bt6 billion.
Sookdhis responded swiftly.
“We set up an online investment war room to follow up on the situation with live streaming,” he says.
What we learnt [from the coronavirus crisis] is that wealth management is not just about profit and loss
That gave jittery retail investors a way to understand and navigate the market rather than simply dump mutual funds at rock bottom prices. It also created a higher level of trust among Finnomena subscribers, he says.
“What we learnt is that wealth management is not just about profit and loss, but about being able to handle a crisis with confidence,” he says.
While assets under advisory management have since recovered, the outlook is gloomy; the economy is expected to contract 8.1% this year while unemployment is likely to shoot up.
However, Finnomena’s success has inspired others.
Back in December, Siam Commercial Bank wheeled out its own robo-adviser service with a minimum investment of just Bt3,000 (equivalent to $100). The bank says the new customized service will create investment portfolios tailored to different “market conditions and investor risks.” SCB says it will use a combination of experts and Artificial Intelligence to select from over 1,700 mutual funds.
Does the new competition bother Sookdhis?
“It shows that we are in the right business,” he says. “If there was only us doing this, I would be worried.”
But could the asset management companies try to cut out Finnomena?
“As we grow bigger, we have more negotiating power,” says Sookdhis. “We are not their competitors, but their distribution channels.”
Given that Finnomena’s share of the local mutual fund market is less than 1%, Sookdhis sees plenty of scope to expand. Longer term, there is also the possibility of wheeling out a digital wealth management platform elsewhere in southeast Asia.
With Sookdhis’s Indonesian pedigree – his mother was originally from Medan – and the country’s success in producing unicorns, that might be a good bet. But his priority for the moment lies closer to home.
“For now, our focus is on Thailand where we are targeting growth of 30% to 50% a year which we have achieved in the past,” he says.