Investing through a digital adviser? Make sure you know the risks

Deal only with licensed financial service providers and look beneath the surface of deals

- Angela Tan

Most of us would have been at some point bombarded by saturation investment advertising, including pop-ups on our social media feed, promising high single-digit returns at a time when ordinary savings deposits are earning next to nothing.

These offers may come with enticing phrases such as "free insurance coverage", "attractive returns" and "guaranteed returns" as well as a push to act fast as they are available for a "limited period only". Some may even offer early sign-up cashback, urging you to transfer your money to lock in your investment before the offer expires.

But on closer examination, you will invariably find that tiny asterisk that should not be ignored because it highlights the fine print or legal disclaimers about the statements made in the advertisement.

The recent debacle facing Chocolate Finance, an online robo-advisory service operated by Chocfin, is an illustration of why it is important to understand the firm you are putting your money in and the information sources you rely on to make your investment decisions.

This is especially critical given the blurring lines between traditional banks and their digital rivals.

Digital trading platforms, digital advisers and online banking services continue to disrupt the industry, and are expected to play a bigger role in the future as they cut investment and wealth management costs, and make products and services more accessible to the public.

According to the Monetary Authority of Singapore (MAS), there are nine standalone robo-advisers in Singapore. These include Chocolate Finance, StashAway, Syfe and Endowus.

Local banking and brokerage groups, too, have their own robo-advisory platforms: DBS Bank's digiPortfolio, OCBC Bank's RoboInvest, UOBAM Invest and Phillip Securities' Smart Portfolio.

DIGITAL ADVISERS ARE NOT BANKS