With Estably, the first Liechtenstein-based Robo-advisor has entered the market. The company tries to combine traditional asset management and digital technologies. How does it work, and who is it for?
Estably launched in early 2020 for clients in Liechtenstein and ten other countries, including Germany and Austria. Based in Vaduz, the startup belongs to the wealth manager Früh & Partner, which has about 1.4 billion Euros under management.
“We are combining the traditional wealth management business of our parent company with the opportunities brought about by digital tools,” says Estably CEO and Partner Andreas Wagner.
The business model: How does Estably work?
Estably is a Robo-advisor that actively manages a portfolio of stocks, bonds, and cash. That means it doesn’t just follow an index, like an ETF, but actively makes trading and investment decisions.
The trading strategy is based on value investing, meaning the fund aims at buying undervalued securities to benefit from rising prices once valuations return to their intrinsic value. To spot these undervalued securities, Estably is using the expertise of its parent company Früh & Partner.
The portfolio allocation depends on each client’s risk aversion. Clients can choose between one of the following portfolio allocations:
To determine an investor’s risk profile, Estably does what every other bank or broker does: They send out a questionnaire. Based on the answers, the company then determines a suitable investment strategy.
Clients can open a brokerage account with either Baader Bank or Liechtensteinische Landesbank (LLB); both are partner banks of Estably. If clients wish to use Baader bank as a broker, they need to bring a minimum investment of 35,000 Euros; with LLB, it’s 100,000 Euros.
Robo-advisors target primarily retail investors
Robo-advisors are currently a trend in wealthtech and have gained further momentum during the COVID-pandemic, as more retail investors are pushing into capital markets. These services provide investment management online with minimal human involvement. As most of the trading is automated and software-based, the costs are usually lower compared to traditional actively managed investment funds.
The first Robo-advisory service was launched during the 2008 financial crisis. Today, there are more than 100 such services available worldwide. Most of them focus on ETF investments – that’s where Estably is differentiating itself from other Robo-advisors, as the firm is actively picking individual securities.
In Liechtenstein, Robo-advisors have so far not played a significant role. Much of the country’s financial industry is still using traditional ways of investing and allocating money and doesn’t extensively use digital tools. Also, many Liechtenstein-based asset managers cater primarily to high-net-worth individuals or institutional investors. In contrast, Robo-advisors usually target retail investors, in particular, the younger, more tech-savvy crowd. Estably somewhat falls in-between. With a minimum investment of 35,000 Euros, the company is out of reach for many retail investors, especially younger investors.
Estably will likely get most of its business from other European countries and not from Liechtenstein. The country is too small and the investor-base not big enough. In Germany, however, Robo-advisory services have been on the rise, and Estably could get its piece of the cake.