With many robo advisors popping up across the country, these advisors claim that they are the future of the financial advisory business. They feel that robo advisory is inevitable and the sooner advisors start using them, the better.
Talking at an event on Robo Advisory earlier this week, Kunal Bajaj of Clear Funds, an online advisory firm said that robo advisors have the advantage of giving advice in an easily accessible and precise way. “We are in an era of smartphones and internet; never before has a country been so ready to adapt to technology. Just as people took to online shopping, more and more investors are going to turn to robo advisors,” he said.
Talking about the capability of a robo advisor in an adverse market, Sadique Neelgund of Network FP, wondered if Robo advisors would be able to hand hold investors. “Investment is an emotional process. A financial advisor understands his clients and tries to assuage his fears during adverse market phases. A robo model will be unable to do this. Which is why a human element is needed in the advisory set up,” he said.
Arguing the case for robo advisors, Debasish Bose, Associate Director, IDFC AMC, compared robo advisors to google maps, “If I were to travel in an unknown city, I might be more comfortable having google maps with me rather than a local guide, as it is more accurate and removes the possibility of human error and most importantly it is free.”
He quickly clarified that while robo advisory might not be free of cost it will still be cheaper than traditional advisory.
While everyone agreed that robo advisors were inevitable, the path ahead seems to be how advisors choose to use robo in their advisory models. “If brick and mortar advisors are able to give the same quality of advice at a fraction of the cost, obviously they will be getting more clients,” he said.
Neville Poncha of IntelX Money felt that though many advisors might be worried about the high cost of client acquisition, the robo model could be implemented in parts. “If you are unable to fund an end-to-end robo model, an integration of robos within an advisory model or a hybrid model seem the logical next step. This way both the advisor and investor can benefit from the best of both the worlds.”
Agreeing with Neville and talking about the adoption of robos within AMCs and financial institutions, Debasish said, “I expect to see more hybrid models coming up, with AMCs also partnering with robo advisors, or developing a robo platform of their own, as has been seen in developed countries, robo advisory will soon be the new reality.”
Like them or hate them, it seems that robo advisors are here to stay. Currently there are 40 odd robo advisors in the market.