Just like everything today that has a digital replacement, financial advisors have been compromised by robo-advisors. If you’re the kind who hesitates to pay a financial advisor to help you with your investment decisions, robo-advisors are free of cost and won’t cost you a penny.
Q1. What are robo-advisors?
A robo-advisor is an automated service that gives you advice on how to manage your investments and help you buy financial products. It’s based on algorithms (math rules) generated by the computer which means that only little human intervention is required. It is considered a breakthrough in wealth management services.
Q2. Are they safe?
The most important question is that, are the transactions authenticated? How do we know that the money is safe? Robo-advisors have a custodian bank where your money and investments are kept safe and secure. Even your confidential data is stored in their multi-layered security model.
Q3. How to use it?
Robo-advisors are particularly simple to use. Based on the information you provide, they can automatically select investments and build a diversified portfolio for you. Once your funds are invested, on an ongoing basis, the software automatically makes changes to the investments to align your portfolio back to a target allocation. Some robo advisors even automatically make trades that can help reduce your tax output.
Due to no human interaction, the services provided are not time restrained. They can provide services to you 24*7 from anywhere. These robo advisory platforms convert your laptops and mobile phones into a virtual office and your financial advisor rolled into one. You can access your documents, check the progress of your plan, simulate the impact of events, restructure your portfolio and also execute a transaction using your mobile app or your laptop. It is as simple as that!
Q4. How popular is it India and what are the sites that offer robo advisory?
There are already 40 or so robo advisors in India already and the number keeps rising. Algorithm-based trading is a relatively new concept in India, but it is surely rising.
Robo-advisor start-up ArthaYantra was one of the few that began in 2008. Now it has over 1.2 lakh customers. FundsIndia.com is another leading advisory in India. HDFC, ICICI, Axis, etc. are a few of the big securities that have come into this sector. Apart from them, there is AdviseSure, 5nance, BigDecisions, FinEdge, Fisdom, MoneyFrog, etc. that are one of the top firms.
Q5. Robo Advisory v/s Traditional Advisors which one to pick?
|Robo Advisory||Traditional Advisory|
|Fully automated based on the answers you provide to their questionnaire||Personal advice which can be customized as per an individual’s situation and its changes|
|Human contact is limited to the bare minimum.||An individual is able to seek advice personally – face-to-face or on the telephone|
|Provides low-cost advisory services||As human advisor provides personalised services as well, the cost is high|
|A robo-advisor is not a financial planner, just an advisor on ways on how to invest||A human advisor along with investing can also help with the planning of your finances|
|Uses advanced technology||Technology is not very advanced but not backward either|
Robo Advisories are cheaper alternatives to personal advisors. If you just started earning and looking to invest yourself going the robo-advisory way is a better option. Although pick only reliable robo advisory services that seem legit and have a good track record.