As robo-advisers take over the task of financial planning, find out if this option suits you.
Robo-advisers are online wealth 1-C management services that JL. ^provide automated, algorithm-based advice without human interÂvention. Currently, there are three types of advisory services available in the country—basic, advanced and evolved. Arthayantra, BigDecisions, Fundslndia, Scr ipbox and MyUniverse are the prominent players in this arena.
Advantages
Low cost: The USP of robo-advisory platforms is the significantly lower cost compared with a human adviser. While the latter offer services for? 15,000-25,000, or 1-2 % of the client’s assets, a robo-adviser is much lighter on the wallet. Arthayantra, for instance, charges as little as ?1,000. Others charge no fee at all, relying on commissions earned by selling mutual funds for cash flow. Big Decisions earns from tie-ups with other service providers.
Easy interface & convenience: The robo-advisory platforms offer a very simple interface, using them is a breeze. There is also a high degree of convenience. Compared with the problem of identifyÂing a competent and trustworthy finanÂcial planner, the task of locating a robo-adviser is easy considering the limited number of players. It is also easy to keep track of investments. The account provides a summary of all your investÂments, shows unrealised gains or losses, allowing for assessment of capital gains at any point, and also lists historical transactions. Switching between funds, re-balancing the portfolio and withdrawing money is also hassle-free.
Limited bias and subjectivity: A big benefit is that it is not affected by biases that creep into human decision-making. The robo-adviser also does not succumb to emotions like greed or fear. No matter what the market situation, you can depend on it to provide logical advice.
No asset size bias: For many youngsters with low net worth, it it is not easy to find a good financial advisers. This is where robo-advisers, with their low entry barrier, can step in.
Shortcomings
No holistic solution: While robo-advisers can help design a portfolio and plan for goals, they cannot offer value-added services like traditional advisors.
Lake of flexibility:
A financial plan should evolve with changing cirÂcumstances. Events like the birth of a child, termination of job, onset of major illness or death of a family member impact one’s finances and require an immediate course correcÂtion. Robo-advisory services are ill-equipped to guide individuals through such changes.
Limited customization: Most robo-advisÂers claim to provide tailor- made solutions based on risk profile. But, a robo-advisory firm has a limited number of risk profiles that are used to categorize clients. For instance, someone nearing retirement may be directed to switch investments to debt instruments. This may be ill- advised if the person has sufficient cash flow.