By Arno Maierbrugger/Gulf Times Correspondent /Bangkok
Islamic finance-oriented investors seeking advice on advantageous halal banking products or investment portfolios now have a new option: A robo adviser called Wahed, the world’s first automated Islamic investment platform.
It was launched last month by New York-based Wahed Invest Inc, a financial advisory company founded by Junaid Wahedna, a Columbia- and Yale-educated entrepreneur, Islamic finance specialist and former financial analyst at New York’s M Capital Group.
The functional principle of Wahed is that of an automated platform which analyses thousands of halal securities worldwide to create portfolio allocations with the highest growth potential for its clients. Its aim is the provision of access to halal portfolio management for 2bn potential Muslim clients around the world, as well as for non-Muslims who want to engage in ethical investing. The proprietary platform uses real-time software which conducts fully automated investment allocations by deploying customised financial optimisation algorithms.
“We believe that the Islamic Investment industry desperately needs reinvention,” Wahedna says, adding that “not only are the products offered inefficient and hard to access, but a dwindling number of people can say ‘I trust my financial advisers to look out for my faith.’ It doesn’t have to be this way.”
He points out that his startup’s mission was “to fix this problem” by using modern technology “to re-imagine and rebuild ethical investing from the ground up with less expensive, more transparent financial products.”
One of the biggest advantages of the robo adviser is – according to Wahedna – the low minimum investment barrier of just $7,500 as opposed to the usual $500,000 minimum required by most conventional wealth management firms. This, he claims, would “democratise” access to financial advice in general and provide the option of ethical investing to a wider range of Muslims worldwide. Furthermore, Wahed offers financial advice for a fraction of the cost of traditional advisers. This also means that the platform is positioning itself as the first global robo adviser to be accessible by the world’s lower socio-economic demographic segment seen as being underserved by the Islamic financial services industry, giving halal finance a far wider reach than before.
The Wahed platform, accessible under www.wahedinvest.com, is currently available to investors in the US only, but it will be rolled out to over 100 countries worldwide starting from 2017. There are also plans to develop an Islamic pension offering for the Middle East and North Africa region, where private sector employee pension plans are in great demand.
The company’s board shows some of the most prestigious names in international Islamic finance, including Sheikh Taha Abdul Basser, former Islamic Chaplin at Harvard University and Shariah board member of Dubai’s sovereign-backed private equity firm Fajr Capital, as well as two former McKinsey & Company partners specialised in Islamic finance. Just two weeks ago, Khalid Yousaf, former director of Islamic Finance & Financial Advisory Services at KPMG and director of Islamic Finance at Dubai International Financial Center, has been appointed chief operating officer at Wahed Invest. The firm is also registered with the US Securities and Exchange Commission and is continually monitored by its Ethical Review Board.
Robo advisers, which came up a few years ago as a new fintech tool, are a hot topic in the banking industry which is currently in disruption. As a class of financial adviser that provides financial advice or portfolio management online with minimal or no human intervention, more banking clients – especially younger adults – are warming up to the idea of getting automated, low-threshold financial advice. Currently, (conventional) robo advisers have an estimated $25bn assets under management worldwide, but this number should grow to more than $250bn, consulting firm AT Kearney Inc estimates. In July 2016, the first robo adviser and pioneer in the industry, New York-based Betterment.com, surpassed $5bn in assets under management, the first robo-adviser to do so. This indicates that Wahed has a huge upside potential in the Islamic and ethical investment segment with its debut offering of a halal robo adviser.
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