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
