Would you Take Financial Advice from a Robot?

By ketkih | July 31, 2015

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Artificial Intelligence has been represented in a lot of movies. I Robot, Bicentennial Man, Ex Machina and even Rajnikanth’s Yenthiran have shown how helpful Artificial Intelligence could be.

But it may not be as far a possibility as it seems. Your financial planning can be sorted out by a robot as well.

Who are Robo Advisors?

Many popular wealth management companies in the United States, like Wealthfront and Betterment, are offering automated investment services to their clients. And these Robo wealth advisory services are slowly catching up in India too.

Robo advisors are essentially wealth management companies providing an automated support for all financial advisory services without any human intervention. Be it trading, investment, portfolio rebalancing or tax saving, the robo advisors can help investors without any human interference. It works with a pre-defined algorithm and analytics, and calculates the best returns and plans for each individual as per his requirements and preferences.

In India, automated financial advisory services are provided by companies like Scripbox, MyUniverse, Arthayantra, BigDecisions and FundsIndia.

Services offered

Robo financial advisors are still in the nascent stage in India. However, the Indian companies offer two levels of services – basic and advanced.

The basic level service is offered by companies like Scripbox, which assists mutual fund investors in designing their portfolio. For example, Scripbox recommends the best mutual fund picks for investors from its basket, using algorithms. So, if you are choosing a long term investment, they will automatically direct you to the best picks in equity. Or, if your intention is tax saving, it will direct you to the best picks in tax saving funds. One can also make investments through them and receive automated portfolio based suggestions through mail.

The advanced services, as offered by MyUniverse, can provide curated investment advice based on your risk appetite, preferences and investment period. They will also analyse your expenses and provide an insight into your spending as well as saving patterns. You can also make investments of any kind through them.

Are Robo Wealth Advisors Good?

Unbiased and in depth advice: The reason behind the success of Robo wealth management services is that it can give unbiased advice and does not mis-sell unlike human advisors. As they are based on refined algorithms, they can out think traditional human wealth advisors, allowing investors to consider more options.

Available 24/7: Since Robo wealth advisors are automated, they offer a 24/7 access at your convenience. So you need don’t have to wait for an individual appointment, or walk into someone’s office.  If you need to make an immediate change in your financial plan, you can access your Robo advisor any time.

Low Cost: Robo wealth advisory services come at a lower cost since they cut out the costs of having a person working for each individual investor. The same Robo wealth management tool is customized for each individual investor, making the service cheaper than humans.

What are the Limitations?

With the good comes the bad, and here are some of the disadvantages of Robo investment services that you need to be aware of before taking a final decision.

Limited Customization: Since Robo money management tools are based on pre-defined algorithm support, they offer limited customization as of now. Therefore a human wealth advisor may give better suggestions on some new products which are not added to the algorithm of the Robo wealth advisor.

Lack of Flexibility: Robo services do not offer flexibility and decide the best route depending on your individual goals. It does not count for any financial emergency that may lead to a situation where you are likely to withdraw funds from your investment.

No Value Added Services: Unlike human wealth advisors who offer many value added services, like investment advice for real estate and other channels, a Robo wealth advisor strictly offers the best options for the financial advice and nothing more.

Robo Wealth advisors are likely to emerge as a popular tool with the Indian investors in the near future. While it offers unique advantages, it also has some shortfalls and you must pick the service only after due consideration of its pros and cons.

Maybe there would soon be a day when your robo advisor could be present in your house and help you out with everyday choices as well.

YOU MAY ALSO WANT:  Find out how your existing investments are faring – Compound Interest Calculator

 

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