Robo Advisory is a process of providing investment advisory services via a programmed set of systems as opposed to by humans. Although many online wealth management platforms provide these services, the concept is in its nascent stage in India. Most investors in India still prefer the traditional methods of investment advisory over the new-age advisory services. Currently, the financial advisory landscape in India is only available to the wealthy (~Rs 50 lakh net worth), managed by full-time fund managers. However, Online Robo platforms can do investment advisory for small and medium investors. There are very few self-directed investors – therefore, for the large part of the population that wishes to create long-term wealth – online platforms providing guidance such as Robo-advisors are essential to the ecosystem.
- The need state
Our investments have gone digital, and our equity shares/Mutual fund units have been dematerialized many years back. So it is evident that our investment advisory services segment to take that route. The key advantage of Robo advisory services are instant support, highly personalized services, and lower cost.
- Target audience
Robo Advisory is best suited for investors with limited investment corpus who do not want to get into ‘DIY’ investment methodology. Robo advisory platforms offer curated investment solutions depending on the investors’ risk appetite and investment time horizon for a small fee. Robo advisory platforms are programmed with pre-defined data and various algorithms to match the investor’s requirement.
An individual risk appetite depends on age and the investment corpus. E.g., Someone who is young may have a higher risk appetite but may have a limited corpus vis-à-vis someone who has retired may have a higher corpus but a very low-risk appetite. The Robo advisory platforms consider these factors and offer curated investment portfolios.
- Technology backed by experts
The chances of the investment advisory going wrong is marginal as the Robo advisory platforms are regulated and built by experts. Moreover, they keep tracking the performance of the portfolio on a real-time basis. Also, the services of Robo Advisory platforms are available 24*7. Investors can quickly plan their long-term goals, invest in expert-built portfolios, and unlock strategies most global investors use to create long-term wealth.
- Tech prowess
Since it’s a digital product, the technology should enable a rich customer experience. Most platforms offer responsive customer service and wealth managers to address any queries.
- The opportunity size
As per the data available on Statista, the assets under management by the Robo-Advisors platforms are projected to reach US$15.33billion by next year. Assets under management are expected to show an annual growth rate (CAGR 2022-2026) of 28.05% resulting in a projected total amount of US$41.21billion by 2026. The number of users is expected to rise by over a 39million users by 2026. The average assets under management per user are expected to amount to US$0.91k in 2022. From a global comparison perspective, the US accounts for the highest assets under management (US$1,164 billion as of 2022).
India has many new and retail customers yet has one of the lowest numbers of investors as per our population. We have already witnessed record new entrants in the market in the past 2-3 years. With low fees, these platforms have the potential to help small-time investors who have limited or almost no investing knowledge and skills. Finally, it is essential for people to fully understand the concept and do some diligence before availing of services from Robo-advisors.
(The author is Mr. Pratik Oswal, CEO, Glide Invest and the views expressed in this article are his own)
