Robo advisory systems: the Indian perspective

Abstract

The financial advisory industry is proceeding towards automation wherein, the portfolio recommendation and rebalancing is done through an automated algorithm. This business model is called as Robo-advisory. Robo-advisors are disruptive forces in the advisory industry and are aimed at targeting the untapped investor segment which is the retail investor. Institutional investors are tapped by regional and national distributors, and HNIs and Ultra-HNIs are tapped by family offices and private banking. And although, IFAs and retail banking are focussing on retail investors, these business models are constrained by their geographic reach and scalability. Also, sustainability becomes a challenge given the small investment amount of these investors, and substantial capital investment. Hence, robo-advisory owing to its DIY (Do-It-Yourself) model is the best fit for this investor segment; since, it has the potential to flourish with comparatively minimal capital requirement.