5 Things One Needs to Know About Robo Advisors
What are Robo Advisors?
Robo Advisors are an all new growing alternative choice for investors in India. They carry out digital management of one’s investment needs and in the process remove human error. Robo Advisors are growing significantly these days.
In the retail wealth management and financial planning space, the human interface plays a big role . Financial planning is an intensive process. Financial Planners need to get their clients (marketing and selling), build trust, they have to suggest products based on the clients risk profile and get back to clients on a regular basis with the performance of the products and further services. In this long process, Robo Advisors can really shorten the time frame significantly.
How do Robo Advisors Work?
How to invest in Mutual Funds through Robo Advisors
Robo advisors, in a nutshell, provide automated investment services. They operate within defined parameters. Most Robo Advisories have base portfolios based on certain themes or asset allocations. They can further be customised as per the investor’s needs. They take the investors data and formulate a portfolio based on the various criteria the investor has including tax saving potentials. The same thing that the personal investment advisor does, but in a digital platform which can handle more iterations and will have less human error.
Are they Risky? – That really depends on one’s risk profile. They will be as risky as the investments through normal financial advisors
SEBI rules for Robo Advisors
Robo Advisories have two entities, one that gives investment advise and one that executes the plan. IFAs or individual planners are not allowed to both advise and execute as per SEBI rules. Robo Advisories have to register as Investment Advisors with SEBI like normal Investment Advisors. All the rules that apply to normal investors apply to Robo Advisor firms.
What to Expect from Robo Advisors
- Less Human Error
- Faster and Ready Made Solutions
- Saves Time
- Higher Credibility
- Can be Customized but less customization than personal financial advisors
How to Invest with Robo Advisors
Most Robo Advisors will charge an Investment or Operational Fee. There is normally a base amount one can invest. Index Mutual Funds, ELSS or theme based funds are popular options. SIPS are advised by most advisors. One can register online for many funds. The Robo Advisor will collect information regarding the risk profile, investment horizon, cash needs, tax liability, investment goals, etc and suggest a portfolio. Since the process will be automated, the human interface will be limited.
Robo Advisory is a mature process whose time has come in India. The SEBI;s regulations need to keep up with these. With online access to investment needs, Robo Advisories give faster and better considered solutions. The Investors are ready for it, are the Advisories ready?
Check out more on Robo Advisors here
https://www.nerdwallet.com/best/investing/robo-advisors