Once upon a time, investing to beat inflation rates and grow money in a relatively risk-free manner usually meant putting money into fixed deposits (FDs) and insurance savings plans, which offered slightly higher returns per annum (p.a.) compared to regular bank savings accounts that were offering rates of around 0.05% p.a.
These investment products are still around, but today, there are more choices in the market — even for risk-averse investors.
This is where robo-advisors come in. And they are exactly what they are: robots that are programmed with specific algorithms to help provide advice on investment choices. At first, investors had their reservations on this new product in the market, but today, robo-advisors have proven themselves to be rather handy in growing investments. In fact, there are a growing number of users who have been putting a portion of their portfolio into cash deposit accounts run by robo advisors.
These accounts are, in fact, still preferred by investors as a way to grow their income even when banks in Singapore are currently offering accounts with higher interest rates such as the DBS Multiplier, UOB One or the OCBC 360, with projected rates of 3.0% p.a., 2.50% p.a. and 2.38% p.a. respectively.
DBS, UOB and OCBC launched their Multiplier, One and 360 accounts in 2014, 2015 and 2013 respectively. But these accounts are a compilation of several products that one has to have with the same bank. For instance, one would have to open up a savings account, have his or her salary deposited into that account, while having to also apply for loans and have credit cards from the same bank in order to enjoy a higher interest rate p.a. Hence, with banks, the higher interest rates from these accounts do come with a caveat.
See: Robo-advisers have yet to displace jobs at UOBAM
However, the landscape today has changed due to the Covid-19 pandemic. Not only have the banks’ interest rates lowered, robo cash accounts like Stashaway and mobile insurance savings plans such as Singlife have slashed their interest rates too.
What does this mean for investors and are these accounts still an avenue that is worth parking money into?
Here is what we found out.
Singlife — 1.0% p.a.
In June this year, Singlife revised its projected returns down to 1.0% p.a. for the first $10,000 and a return of 0.5% p.a. on the following $90,000 at a projected crediting rate, which was effective starting July 1.
The revised rates were announced following the re-opening of Singlife after its merger with Aviva after a six-month hiatus for the former.
The cut in projected returns was the fourth such one in slightly over a year, reflecting the interest rate cuts by central banks around the world.
In March 2020, the mobile insurance savings plan offered projected returns of 2.5% p.a. for the first $10,000; returns of 1.0% p.a. on amounts up to $99,999.99, and no returns for amounts above $100,000.
In October 2020, Singlife announced that it would be offering its customers projected returns of 2.0% p.a. for the first $10,000 starting Nov 1, 2020. Its projected returns of 1.0% p.a. from amounts above $10,000 and below $100,000 remained the same.
The returns at the time, were deemed as still attractive that applicants were put on a waiting list on Dec 14, 2020, due to the overwhelming positive responses the company received.
According to Rachel Chen, chief digital officer at the newly-merged entity Aviva Singlife, customers have parked over $1 billion of their savings with the company as at June 29.
However, from Jan 29, Singlife reduced its rates yet again to 1.5% p.a. for the first $10,000, before further slashing its rates to the current 1.0% p.a. in July.
When asked whether Singlife’s initial return rate of 2.5% p.a. was still sustainable for the company, Chen explains that the rate was “unbeaten” in the market for eight months in 2020, but that it was set before the lowered interest rates amid the Covid-19 pandemic.
“Despite this, we continued to offer competitive rates that outperformed many financial products throughout the year and into 2021, delivering on our promise of offering better return for customers and unlocking the potential of their money. We continue to do so with our bonus returns,” she says.
For instance, since its re-opening, Aviva Singlife has introduced new features where customers who spend $500 a month with the Singlife Visa Debit Card and invest a minimum of $1,000 in Grow, get to earn an extra 1% p.a. on top of the base 1% p.a. return in the Singlife Account.
When asked about its edge over other cash deposit products offered by robo advisors or bank accounts with high interest rates, Chen says Singlife’s offering continues to stand out due to the “peace of mind that comes with its high liquidity, flexibility, added protection and world-class investment expertise”.
To be sure, Singlife currently lets its customers withdraw their balance at any time with no lock-period or fees. Their balances are insured of up to 105% for the Singlife Account and up to 101% for its Grow product in the event of terminal illness or death.
Stashaway Simple — 1.2% p.a.
StashAway revised projected returns from its trademarked Stashaway Simple portfolio down to 1.2% p.a. on March 1 this year. This is the first revision since the plan was launched in November 2019 with a projected return of 1.4% p.a.
In an email to account holders, Stashaway highlighted the low interest rate environment for its cautious move. “As Covid-19’s impact on economies has yet to diminish, central banks continue to maintain low interest rates, and in some cases, further lower interest rates. Our investment team expects central banks to continue keeping interest rates ultra low in the coming months in order to stimulate their economies.”
“Given the continued uncertain state of the global economy, we’ll be adjusting the projected rate for Simple on 1 March 2021 to 1.2% p.a.,” wrote the Singapore-headquartered company in February.
As at Oct 1, 2021, this rate is unchanged, according to Stashaway’s website.
Stashaway also underscored the risk-averse nature of the cash management plan, which allocates assets equally between the LionGlobal SGD Money Market Fund and the LionGlobal SGD Enhanced Liquidity Fund SGD Class I Acc.
“Remember: Simple is technically an investment... You might be wondering why we aren’t just investing in different funds to earn a better rate instead of now changing the projected rate. It’s because our focus is on risk management: Simple’s StashAway Risk Index isn’t changing for a slightly better return,” wrote Stashaway.
“We believe that cash management should simultaneously serve two equal purposes: First, it should keep your cash away from risk; and second, it should grow your cash,” the company added.
Founded in Singapore in 2016 by Zalora Group's former CEO, Michele Ferrario; former managing director and global head of derivatives strategy at Nomura, Freddy Lim; and Nino Ulsamer; Stashaway was the first robo-advisor to obtain a full capital-markets services license (CMS) from the Monetary Authority of Singapore (MAS).
Stashaway is aware of the competition’s higher projected rates, noting other similar portfolios in its email. “Though you may be able to find better projected rates for your cash, remember, we always encourage you to consider the risk that you’re exposing your money to. Not all cash management options out there are the same. You don’t want to take unnecessary risk on your cash in order to grow it.”
Syfe Cash+ — 1.5% p.a.
Syfe held out for a month longer than Stashaway, trimming the projected return of its Cash+ portfolio to 1.5% p.a. on April 7.
A key difference, however, is that Syfe launched Cash+ only this January. The rate revision came exactly three months after launch, which originally projected returns of 1.75% p.a.
For 1Q2021, Cash+ returned 2.18% p.a, higher than its projections. According to an email sent to account holders on June 10, the Cash+ portfolio delivered “an above expected return” of 2% p.a. in May.
“The Covid-19 pandemic has triggered a wave of reduced interest rates that have hurt consumers and savers,” said Dhruv Arora, founder and CEO of Syfe at the portfolio’s launch in January.
“As uncertainty in markets looks set to continue, we wanted to offer investors an alternative to traditional bank accounts and create a product that allows steady savings growth in a volatile economic environment. We are confident that Syfe Cash+ is an attractive option for those looking to make their savings work harder in 2021,” he added.
But the low interest rate environment proved challenging as the quarter progressed. “Given that interest rates and yields on short-term bonds are expected to remain low in the months ahead, now is the time to make an adjustment to our projected return,” wrote Syfe in an update in April.
Still, the fund allocation remains the same. The Cash+ portfolio holds three funds — the LionGlobal SGD Money Market Fund, the LionGlobal SGD Enhanced Liquidity Fund and the LionGlobal Short Duration Bond Fund.
“The underlying holdings in these funds are low-risk assets, such as Singapore and international government bonds, commercial bills and high-quality corporate bonds,” wrote Syfe.
Founded in 2017, Syfe is a digital wealth manager that launched in Singapore in July 2019 with $5.2 million in seed funding, led by UK-based venture capital fund Unbound.
In September 2020, Syfe closed a US$18.6 million Series A funding round led by PayPal co-founder Peter Thiel's Valar Ventures, with Unbound as a returning investor.
Endowus Cash Smart Ultra — 1.7% to 2.0% p.a.
Backed by UOB Kay Hian, Endowus launched its Cash Smart Ultra solution in April, touting Singapore’s “highest cash management yield”.
Cash Smart Ultra, the highest-returning tier among Endowus’ three Cash Smart portfolios, targets a 1.7% to 2.0% p.a. yield from its diverse basket of five funds.
They are: LionGlobal SGD Enhanced Liquidity Fund (28%), Fullerton Short Term Interest Rate Fund (25%), LionGlobal Short Duration Fund (25%), Nikko Shenton Income Fund (12%) and PIMCO Low Duration Income Fund (10%).
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According to Endowus, its Cash Smart suite — which also includes Cash Smart Core and Cash Smart Enhanced — has delivered higher returns than originally projected at its launch in June 2020.
“Since inception, Cash Smart Core has performed on the higher end of its projected yield with an annualised return of 1.25%, while Cash Smart Enhanced generated an annualised return of 2.57%, significantly higher than the 1.9% to 2.2% targeted at launch,” says the company in a press release.
One year on, Endowus has moderated its targets. According to its website, Cash Smart Core is projected to return 0.7% to 0.8% p.a. from an equal allocation between the Fullerton SGD Cash Fund — Class A and the LionGlobal SGD Enhanced Liquidity Fund.
Meanwhile, Cash Smart Enhanced has a target return of 1.1% to 1.3% p.a. from an equal allocation between the LionGlobal SGD Enhanced Liquidity Fund and the UOB United SGD Fund.
Endowus notes the “collapse” in interest rates globally in March 2020, which have yet to recover. “As it stands, SIBOR [Singapore Interbank Offered Rate], government bills, savings accounts, Singapore Savings Bonds, and bank fixed deposits are all below 1% — severely limiting investors’ opportunities for adequate yields on their cash,” notes the company.
“We cannot make a prediction on the future direction of interest rates,” says Samuel Rhee, chief investment officer at Endowus. “However, our Cash Smart clients can rest assured that we will continuously improve these cash management solutions by managing risk and optimising the portfolio to achieve the highest yield possible, utilising the full breadth of money managers and underlying products available to us.”
