By Prakarsh Gagdani
Technology disruption has been transforming the world of finance. The wave of automation and digitization are causing massive changes in the finance world. One such game-changer is Robo-advisory.
Robo-advisors are being considered as the “future of investing”, and I tend to agree to it. The takeover of the robots in the classic field of wealth management is an emerging trend across the finance sector.
Fintechs have taken advantage of Robo-advisory to disrupt the unpredicted industry of personal investing, as the later brings with it new possibilities in financial consultancy and advisory space.
So what exactly is Robo-advisory
Just as manufacturing companies have replaced assembly line workers with robots, the emerging fintech companies have replaced financial advisor with robo-advisors. Robo-advisors use big data and run complex algorithms to determine the best places to put clients’ money, based on the inputs provided. Robo-advisors are 100 percent analysis driven and do not rely on decision-making based on any gut feeling or emotions. Simply put, Robo-advisory is an automated investment advice platform to assist consumers over financial planning.
Investment is a complex issue and you need to get advice from experts to gain better insight. The algorithm-based investment advisory is a safe choice as tech-enabled machines are taking the decision based on your inputs.
This easy-to-use form of investing in the stock market is appealing to a whole new generation of investors and is encouraging them to get involved. I would also like to point out that the smartphone apps have also contributed to the growth of Robo-advisory, as they make investments easier and more convenient.
The overall industry
According to Statista, a German online statistics portal, assets under management in the Robo-Advisors segment amounts to US$980.5 bn in the beginning of 2019. Assets under management are expected to show an annual growth rate (CAGR 2019–2023) of 27 percent resulting in the total amount of US$2,552.3 billion by 2023. From a global comparison perspective, it is shown that the highest assets under management is reached in United States (US$749.7 bn in 2019).
The sector has been growing at a fast rate across the world. Moreover, the technology advancement, digital transformation, penetration of mobile and internet are the major reasons for the growth of the robo-advisory services globally.
The scenario is also optimistic in India. Whatever is happening in the west will happen in India too, sooner or later. It is through technology that one can reach out to a much larger market and in India the digital wave has helped create strong awareness about robo-advisory. People who were until now either not able to afford or have access to a wealth advisor, now have a way out. The demographics are favorable too. In every segment – high net worth individuals, the mass affluent and regular bank account holders – there is a very strong growth, so demand of such investment tool is only bound to rise.
Re-defining the wealth industry
The opportunity for robo-advisors is actually enormous as it intends to remove the barriers of entry for small investors to the world of wealth management. Low fees, extensive analytical research, and low minimum investment requirements have helped this online automated investment tool surge its popularity amongst investors who cannot meet the financial requirements of traditional human advisors.
It is interesting to see that technology now offers guidance to investors, ensures better precision and accuracy in terms of decision-making and can avert any scope for slippage.
Additionally, robo-advisors offer a range of services useful in catering to a wide group of investors based on their budget, risk appetite, and the term of the investment, making it suitable for all investor class.
Concluding
Technology has been the game changer and with robo-advisory putting your money to work is not expensive anymore. The advent of robo-advisory services can surely help you make a smarter and un-biased decision in regard to investment.
Robo-advisory has the potential to upend traditional finance services as more and more new-gen investors turn towards this reliable, automated and inexpensive tool. At the moment, it will be right to conclude by saying that Robo-advisors have brought in a new era in investing, where investors can rely on technology and data instead of gut feeling.
(The author is the CEO, 5Paisa)