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Everything You Should Know About Robo Advisory Services

Updated on :  

08 min read.

Investment is a complicated subject from the get-go. Not everyone can figure out the right investment options to invest in. Consequently, many people have lost all their money. This is when you need an investment advisor. The regulations and growing popularity of investment products have urged for a more transparent system. 

The popularity of investment products eventually boosted the system’s transparency in fees, commissions, expense ratios, and fiduciary duties. This, in turn, has encouraged Indian investors to understand the products better and ask the right questions when entering into a contract with a financial service provider. 

Come to think of it, robots were invented to perform tasks that are tough for mere humans to perform. Developing on these lines, robots have become capable of providing investment advisory services to humans looking for simple and effective advice in this space with Robo Advisory Services’ name. 

Such an application of robots has now come into existence and is still evolving towards making advisory services better. This system is a total digital experience with no dependence on human agents or physical interaction. It includes a data-driven approach to make investment selection. Investors are now attracted to Robo services to get uncomplicated and reliable advice.

Robo Advisor – What is it?

A Robo advisor is an online platform that offers automated investment management advice or a custom portfolio based on your investment strategy using one or more asset classes at a much lower cost than human advisors. The basic version of this service only offers a digital platform where investors receive an automated portfolio proposal created by automated fund selection.

On the other hand, there can be an algorithm-based Robo advisor that is capable of automatically executing and rebalancing an investor’s portfolio according to a pre-decided investment strategy. This is bound to the strategy preset, and the investor may not have a say in the algorithm’s choices.

There is another category of Robo services that is fully capable and is based on a self-learning system. This system, again, does not require human interventions.

Where does India stand?

The Robo services that India has right now can be categorised as digital rather than intelligent or self-learning. The capabilities of these digital advisory systems are not wide apart from the traditional systems at the moment. In India, the Robo advisory systems provide broadly fitting investment advice for retail investors who are hesitant to pay for customised services.

On the other hand, advice related to crucial areas, such as financial planning, tax planning, planned exit or switching, and investment strategies during a market crisis, are preferred with the traditional advisory system.

Further, the Indian Robo advisory system can be classified into three types:

  1. Fund-based Robo Advisory: It offers risk-profiling and goal-based suggestions. Suitable for risk-averse investors who do not wish to have direct equity exposure. No fees charged.
  2. Equity-based Robo Advisory: It focuses only on equity portfolios. Suitable for those who have a fair knowledge of equity markets with moderate to aggressive risk profiles. This system uses multiple brokers and is capable of offering sector-wise, thematic portfolio advice.
  3. Comprehensive Robo Advisory: This fee-based system focuses on aggregating the customer’s net worth information and understanding their risk profile to provide complete wealth management solutions. 

Now that you have a fair idea of the Robo Advisory System and the extent of its availability in India, would you like to give it a try? What do you think of having an automated system advising you on investment strategies?

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