Is Robo-Advisory Revolutionising

the investment landscape ?

What is a Robo-Advisory ?
Robo advisors are digital platforms that provide automated, algorithm-
driven financial planning services with little to no human supervision. A
typical robo advisor collects information from clients about their
financial situation and future goals through an online survey, and then
uses the data to offer advice and/or automatically invest client assets.
Robo-advisor is not a simple replacement of human financial advisors.
A robo-advisor’s duties go way beyond those of a human advisor.
• Let’s list down the features of the ideal robo-advisory in India –
• Should offer custom solutions
• Should use technology to design and execute custom solutions
• Should be able to actively manage your portfolio
• Should use human effort and judgement wherever technology falls
short
The Evolution of Robo Advisory Model
The first robo-advisors came alive in 2008. It was first launched by
‘Betterment’ a wealth management company in US. This innovative program
was investor friendly that worked on ‘online interface’. The objective was to
‘rebalance investor assets within target-date funds’. Rebalancing of the fund
is done to make it more conservative as the target date (e.g. the retirement
age) approaches with fewer equities and more fixed income.
The strategy followed by robo advisors is essentially passive, ‘buy and hold’
(investor buys stocks and holds them for a long period of time, regardless of
fluctuations in the market). Rebalancing is done only when due to market
shifts there is a skew in a portfolio’s allocations (equity, debt and other
assets).
Prior to this, ‘wealth management software’ was used by human financial
advisors to automate their workload. With Robo advisors, the services of
these financial adviso
How Robo Advisory concept arrived
• Active management of your portfolio
• The trap of greed and fear
• Low cost
• Zero Paper Work
• Easy interface
• No room for bias
• Money in safe hand
• https://www.businesstoday.in/magazine/money-
today/investment/the-rise-of-robo-advisors/story/231905.html
How Robo advisory Growing
• Global robo-advisory market

Portfolios of investments by calculating their risk and returns along with profits for long-term. The
global robo-advisory market is expected to grow at an overall annual compound growth rate
(CAGR) of 53.54% from 2018 to 2023 leading to a global revenue of USD 73.70 Bn by 2023.
Depending on various types of robo-advisory services available in the market, the global robo-
advisory market has been classified into pure robo-advisors and hybrid robo-advisors. Among the
different types, demand for hybrid robo-advisors is anticipated to be the most promising in the
coming years. This is due to the increased affordability and accessibility with low financial
assistance fee and rising objectivity, consistency and transparency.
In addition, demand for robo-advisory services from various client asset segments including
pension funds, insurance companies, sovereign wealth funds, high-net-worth individuals and the
mass affluent is also provided in this report. Demand for automated financial services from mass
affluent individuals held the largest market share in 2017 and is anticipated to maintain its
dominance during the forecast period.
• Key growth factors

The robo-advisory market is predicted to witness a high growth rate

owing to the surge in affordability and accessibility with low financial
assistance fee and rising internet penetration along with advanced
technology. Increasing competition with new entrants and diversified
services is one of the primary factors that is expected to augment the
demand of robo-advisors at an extensive rate in the coming years.
• India Robo-advisory Market
The robo-advisory market in India is expected to cater to the demand and provide quality robo-advisory
services needed by and beyond 2020. The Indian robo-advisory market is anticipated to show a double-digit
growth rate during the forecasted period. Various wealth management firms and banks in India are planning
to unveil robo-advisory services across the country by the end of 2020.
Revenue growth in India for the robo-advisory market is growing at a considerable rate. This trend has been
driven primarily by the rapid rate at which technology is being adopted and also the increasing incidence of
internet penetration.
By type, the market is segmented into hybrid and pure robo-advisors. Relatively lesser penetration of
financial products in India compared to developed markets is anticipated to enhance the usage of robo-
advisors based on algorithms. India is also expected to emerge as a promising market for robo-advisory
services by the end of 2020.
By the types of client assets, the market is classified into the mass affluent, high-net-worth individuals,
pension funds, insurance companies, and sovereign wealth funds. The mass affluent segment is crossing the
market share of the high-net-worth individuals during the forecast period owing to its high growth rate.
Available robo advisors in India:
Many financial firms are now moving towards the online investment and savings.
Some of the developed robo advisors in India are:
i. Bigdecisions: It provides online services for all your investment needs.
ii. Fundsindia: It was initially developed for mutual funds only. It was started in
2009 at Chennai. Now it provides financial advice in all the fields of wealth
management.
iii. Arthayantra: It is another online service provider which focuses on three main
things that are comprehensive financial planning, interconnect different
aspects of financial management and make investor’s goal centric.
iv. Scripbox: This is also an online platform where investments can be started with
a very minimum amount and also guides about the wealth management.
v. MyUniverse ZIPSIP: This is the latest robo advisory firm launched by Aditya
birla group. This model focuses on financial management and investment
techniques.
Trend and news about robo advisory
Top companies in Robo Advisory
Robo Vs Human
Need and Advantages of Robo Advisory
When it comes to investment and saving many of us are not able to do this due to lack of time, lack of
knowledge about different funds and various techniques of investing. There are many issues in the traditional
technique of financial management which are overcome by robo advisors. The following factors justify why any
investment advisory firm would like to go for a robo advisor –
Robo advisors can work continuously. So the investment firms provide 24/7 Robo advisors are much cheaper
than the traditional advisors. So, they provide low cost services without any human intervention.
Robo-advisors charge much less than the traditional advisors. For around 1% plus charges for human
advisors, robo advisors charge around 0.15% to 0.75% of assets under management.
Robo investment advisors maintain transparency in the services provided by them like fees, trades &
portfolios, etc.
Robo-advisors are based on complex, algorithms and assumptions. They use the information given by the
investor in an unbiased manner and provide a standardized, diversified portfolio based on an individuals’ basic
risk tolerance. There are little chances of errors and overall portfolio risks.
Robo advisors are efficient i.e. every little change in the portfolio can be instructed efficiently & effectively.
Robo Advisers can target a large population of small investors who
Limitations of using Robo Advisors
Robo advisors are modern, easy to use and provide standardized investment solutions. But
they are not fool proof. They have a number of limitations like
They fail to provide a personal guidance. They work on artificial intelligence to the level
they are programmed. They can’t think beyond their programmed capacity and are not
flexible to accommodate a unique situation for which they have not being prepared. They
can’t provide a ‘friendly advice’ that many confused people seek desperately especially
when the markets are volatile.
There are times when investors need advice beyond money matters. Or they may require
an integration of financial, tax and estate plans. These demands can only be handled by a
seasoned human advisor and not a robo advisor.
Some investors require a face to face meeting with the advisor which is not possible in
case of a robo advisor.
For any change in investment rules or policies, robo advisors need to be reprogrammed
and that may take time, money and efforts. Human advisors on the other hand start using
the modifications with immediate effect
Conclusion
Services of robo-advisors are being opted by a number of companies
and this will lead to further testing and improvements. Robo-advisors
may not be appropriate for everyone but they definitely offer a
valuable complementary resource to investors. Almost all the Robo
Advisory models in India develop a Static Asset Allocation model based
on the information given by the investor.
They recommend the good funds to invest in. What they miss out is
timing the market. They fail to recommend the time when to reduce or
increase the weightage in Equity / Debt. There is vacuum for a Dynamic
Asset Allocation model which studies the valuation of the market on
the basis of the parameters which affect the markets.