Robo advisors: Stay relaxed while getting accurate financial advice

Financial advice is imperative for effectual planning and investment. In the current scenario, people consult either experienced family members, friends, or experts for financial advice. All advisors when suggesting a financial plan, evaluate and give suggestions based on a set of logical rules/ algorithms. A robo advisor automates these mental algorithms and provides the benefit of it to the masses through an online, digitally rich and easy user interface.

Robo advisors give users access to advice by highly qualified experts who have multiple decades of financial experience with them as against serviced by a 22-25 year sales executive, or a family member. Also, since this is available online and requires minimal human intervention, it is the best and most economical way to make customised expert financial advice available to the masses.

Sparing few financially aware and committed investors, people in India turn to advisors for planning and implementing their financial investments. However, the problem with traditional human- driven model is three fold.

Capability (Do they have the skill-sets?): Though our friends and family know us well, mostly (especially true for parents) they are steeped in traditional ways of saving. So, many of us have been pushed into purchasing endowment policy or investing in public provident fund (PPF) by our fathers. They also might not have the right financial experience, or knowledge to advise. At banks, relationship managers, others are mostly recruited for their sales skills leading to financial advisory skills taking a back seat.

Capacity (Who will cater to masses?): Bank relationship managers and advisors are a privilege of the rich as reduction in distributor commissions have made intermediaries vacate the low/ medium end of the market.

Mis-selling: With the incentives dependent on pushing the highest revenue products, right advice is often the first to get sacrificed.

Robo-advisors reduce a lot of unpleasant experience of interaction. There is no pressure for you to buy right now, in addition to having the option of doing it at your own convenience. The design and UX at certain platforms are created to engage users without being too intrusive.

The US has seen sharp uptake of robo advisory services by all classes of investors - new and ultra-rich. Robo advisory is the future for the financial sector in India.

The writer is co-founder MintWalk.com