Islamic Fund Management
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Figure 2.11: Quantum Change across the Value Chain of Islamic Fund Management
Source: Adapted from PWC (2017b)
For instance, fintech has already started changing investment advisory services by introducing
robo-advisers that take over the roles of human financial advisers, planners and fund
managers (Investopedia). The first robo-adviser was launched in 2008, known as ‘Betterment’.
The robo app or web platform allows clients to provide details on their financial situations and
investment objectives; the robo-adviser utilises the data to recommend an optimal portfolio to
them for a minimal fee. The service is much cheaper compared to the fees charged by
traditional advisers; it is an option available to clients who are comfortable with investment
products. Besides being low-cost alternatives, automated investment-management advice also
offers the advantages of being accessible to everyone, including low-budget investors, being
convenient and efficient, and being available 24/7.
The digital platform technology used is said to be similar to the automated portfolio-allocation
software used by human wealth managers, to passively manage investors’ portfolios since the
early 2000s. The difference with the robo-adviser is that the technology is now made
accessible to clients directly and can perform more sophisticated tasks such as tax-loss
harvesting (i.e. selling a security at a loss to offset a capital gains tax liability), investment
selection, retirement planning and overall financial advice.
The number of such robo-advisers has grown to about 200 in the US, with more being
launched by asset management firms every year (Investopedia). For the Islamic fund
management industry, they can be used to assist in the process of Shariah screening of
investments, Shariah-compliant asset selection, purification of investments and adding
transparency to the Shariah governance framework.