Technology is disrupting all industries. Booking travel tickets, ordering food and hailing taxis can now be done in an instant with the help of smartphones. Around the world, some jobs like lift operators, factory workers, toll collectors, ticket sellers are being taken over by machines. When online investing platforms offering mutual funds through web and apps made their entry in India, advisers got worried if these players would make them redundant.
Growth of Robos
It is worth noting that online investing firms have been able to garner decent assets under advisory in a short span of time. For instance, direct plan offering app Kuvera has AUA of Rs 3,000 crore. Similarly, discount brokerage firm Zerodha’s Coin has built AUA of Rs over Rs 4,000 crore. So technology and social media is playing an important role in the growth of these players. Realistically, for an individual adviser, building this kind of AUA could take decades.
But even independent financial advisers (IFAs) are not far behind. With the help of stock exchange platforms and MF Utility, IFAs are being able to increase their volumes and expand geographically. Some advisers are creating their proprietary mobile apps and websites which enable seamless transaction execution. So providing digital services is helping advisers free up their time to build deeper relationships with existing clients through behavioral coaching.
Coming to the issue of whether robo advisers are a threat to IFAs business, it does not appear so. Instead of threat, online platforms seem to be collaborating with IFAs. Some online investing platforms like AssetPlus, FundsIndia, iFAST are providing a platform for IFAs to provide the tech edge to clients.
Building trust
One of the primary issues faced by financial services institutions is that they have not been looked upon as trustworthy, finds an Edelman survey. Areas where financial services firms fall short are – no product/cost transparency, confusing products, unwanted selling and unresponsiveness.
The survey shows that human interaction is highly coveted in financial services. Around 31% of respondents said it was most important to interact with a real person when getting investment advice. When people are essential, which source of information do investors trust for financial information and advice? Around 42% respondents trusted an investment adviser, followed by friends and family (40%), information from websites/newsletters (19%) and employees of companies (18%).
Another survey conducted by Octopus Group validates these findings. It shows that out of the 2,000 people surveyed, just 15% said they would trust robo-advice (defined as online investment management, offered without any human intervention). Active distrust of robo-advice is most prevalent among those aged 55 and older (63%) and even higher among retirees (71%).
Future is Bionic
Nevertheless, robo advisers are here to stay and they will serve a market which is looking for online advice. At the same time, people would still desire to share their hopes, fears, aspirations and goals with a human adviser to help them have a positive influence in their lives. Just like an aircraft uses autopilot and the judgement and experience of a human pilot, financial advisers and technology will go hand in hand to create a winning proposition.