Robo Advisory – An opportunity which is here to stay

If you spoke about investing your money in stocks, bonds etc., you always had to read up to take calls or had to look for financial advisers to help you with the same. The first option was risky and time consuming as you had only limited knowledge and the second one was expensive.

In came the age of Robo-Advisors, i.e. online algorithms which understand your investment requirements and structure your portfolio accordingly. Robo-adviros were able to add value to the retail investing ecosystem in many ways.

Value created for Users

-     Cheaper & Less Prone to Errors: because of low human involvement in the process. Fees generally lie in between the 0.3-0.5% range, as compared to fees of financial advisors which tend to be over 1% depending on the portfolio size

-     User Control & Transparency: users are in control of their investments and can easily track their portfolio

-     User Experience: most platforms offer users a very ‘human-like’ interactive platform

Value created for the Platform

-     Scalable: scaling is easier with an automated platform. No (or very little) additional resources would be required when adding users

-     Incremental Improvements: an algorithm can be tried, tested and improved upon incrementally. Human advice has more subjectivity and is more difficult to do so

Now that we see that there is value created for users, we can work out some use cases for robo-advisory. Use cases can be based on end use or a potential user.

Use Cases based on End Use:

Event driven: users may want to save up for some future event such as a child’s wedding, a child’s education etc.

Future purchase driven: users may want to save money to buy something in the future like a house, assets like jewellery, assets to start a business and so on.

Personal goals driven: users may want to start saving and investing their money to grow personal wealth or save for retirement or saving for an emergency etc.

Use Cases based on Potential Customers:

Young people in a job: looking to grow personal savings, buying assets like house and jewellery

Parents: wanting to invest for their children’s education, marriage

Aging people: looking to plan their retirement