X

Sign up for Equitymaster's free daily newsletter, The 5 Minute WrapUp and get access to our latest Multibagger guide (2018 Edition) on picking money-making stocks.

This is an entirely free service. No payments are to be made.


Download Now Subscribe to our free daily e-letter, The 5 Minute WrapUp and get this complimentary report.
We hate spam as much as you do. Check out our Privacy Policy and Terms Of Use.
Will Robo-Advisers Spell Doom For Traditional Financial Planners? - Outside View by PersonalFN

Helping You Build Wealth With Honest Research
Since 1996. Try Now

  • MyStocks

MEMBER'S LOGINX

     
Login Failure
   
     
   
     
 
 
 
(Please do not use this option on a public machine)
 
     
 
 
 
  Sign Up | Forgot Password?  

Will Robo-Advisers Spell Doom For Traditional Financial Planners?
Aug 18, 2015

In the financial services industry, a new wave of technology is on the horizon. An increasing number of systems are being developed to supplant traditional means of providing services. One such technology are the Robo-Advisers, which are actually digital advisors that provide portfolio management and financial planning services online, without any human intervention. These kind of advisors are usually affordable than human advisors to all classes of investors.

As on December 2014, such advisors managed about $19 billion, according to a study by Corporate Insight. And it is expected that in the coming years, use of Robo-Advisors will increase even more.

Now for the vital question; should you opt for such digital advisors?

The most important thing which you must look for while choosing an advisor is the quality. Whether you must opt for a digital advisor or a human advisor depends upon your needs and suitability.

Digital advisors provide a platform from which advisers can look to further market penetration by offering these services at a fraction of the cost. In a country like India, where retail equity market participation is less than 2%, there is tremendous scope for growth. However issues such as lack of adequate financial knowledge or investment advice usually serves as an impasse. With the introduction of smart systems such as robo-advisers these barriers could be broken. Investors, who have a small amount to invest, may find it very difficult to pay the relatively high fee of a human financial advisor. Digital advisors solve this problem by being very economical in comparison to their human counterparts. Moreover, they also provide various services such as portfolio management, financial planning, advice on insurance and so on.

However, it needs to be considered that while such advisors can construct your financial plan they may not be able to take into account sudden change in circumstances in your life. Simply construction of a financial plan will not help you to meet your goals. Any changes in your personal or financial life such as addition / deletion of a family member, loss of job, windfall gains etc. also need to be imbibed in your plan as per the situation for prudent planning. A human planner will not only be able to inculcate such changes into your plan, but also tailor the plan around your specific needs.

Moreover, you can discuss your specific circumstances and situations easily with a person. It is not necessary that all digital advisors will be designed to take into account all the conditions and circumstances of every client.   

PersonalFN is of the view that while robo-advisors might help you for planning at a rudimentary level and there is nothing wrong with them in general, they might not be able to factor in complex information while drawing a financial plan for you. In this respect, human financial planners play a crucial role, while planning for one's financial goals. However, remember that even while selecting a human planner, it is important that you select an unbiased, experienced and qualified planner.

PersonalFN is a Mumbai based personal finance firm offering Financial Planning and Mutual Fund Research services.

Disclaimer:

The views mentioned above are of the author only. Data and charts, if used, in the article have been sourced from available information and have not been authenticated by any statutory authority. The author and Equitymaster do not claim it to be accurate nor accept any responsibility for the same. The views constitute only the opinions and do not constitute any guidelines or recommendation on any course of action to be followed by the reader. Please read the detailed Terms of Use of the web site.

Equitymaster requests your view! Post a comment on "Will Robo-Advisers Spell Doom For Traditional Financial Planners?". Click here!

  

More Views on News

Sorry! There are no related views on news for this company/sector.

Most Popular

How to Avoid a 90% Loss Suffered by This Super Investor(The 5 Minute Wrapup)

Jul 12, 2018

Blindly following super investors is a dangerous game to play. Here's how you can avoid such mistakes.

The Answer to Your Wealth Worries: Small Caps (Especially Now)(Profit Hunter)

Jul 10, 2018

If you're worried about the markets - you are on the wrong track. This is opportunity - put your wealth-building hat on, instead - Richa shows you how...

The Multiple Problems with the Minimum Support Price (MSP) System(Vivek Kaul's Diary)

Jul 11, 2018

The price signals that MSP sends out, creates its own set of problems.

ICICI Pru Mutual Fund Tarakki Karega! - The Unethical Way?(Outside View)

Jul 11, 2018

PersonalFN explains how ICICI Prudential Mutual Fund flouted the norms of related party transactions while subscribing to the IPO of ICICI Securities.

PPF v/s Mutual Funds: Which Is Better?(Outside View)

Jul 10, 2018

PersonalFN highlights the key points of distinction between PPF and mutual funds.

More

Small Investments
BIG Returns

Zero To Millions Guide 2018
Get our special report, Zero To Millions
(2018 Edition) Now!
We will never sell or rent your email id.
Please read our Terms

MARKET STATS