There are about 45 robo-advisors in India. More are expected to come up. Many new distributors are finding out that, compared to traditional set-ups, technology provides better and cheaper ways of reach out to new and potential clients-especially amidst the tighter distribution regulations that have reduced the distributors' commissions. At the same time, young investors are spending more and more time on the internet.
Enter robo-advisors. These are internet-based distributors that do away with direct human intervention. These are, essentially, computer programmes designed to assess your risk profile and goals, and then suggest an appropriate basket of financial products.
You can also buy and sell online through them, after they complete your analysis. After that, the robo-advisor monitors your progress and suggests asset re-allocation. But keep these things in mind before going to a robo-advisor.
Human intervention
A robo-advisor is a computer programme. You cannot speak to it like you can with a human adviser. Although US-based robo-advisors are free of humans interactions, in India some robo-advisors have call centres to help with opening accounts. Some of these call centres also give some guidance over the phone about basic concepts like what a mutual fund is, but don't expect anyone to speak to you on a continuous basis. The robo-advisor's usual modes of communication are emails and text messages.
To be able to use a robo-advisor, you need to be computer and internet savvy.
Robo-advisors require you to be online savvy because when they make a suggestion to you, you need to be able to research them a bit on your own, on the internet.
In fact, choosing one robo-advisor over another, too, requires you to be able to do some online research.
The limitations
At present, most robo-advisors offer just mutual funds in terms of products. They don't offer direct equities. Typically, robo-advisors even in the US are offering only mutual funds for now. Over time, they are likely to start offering more products.
But, be aware of the limitations of the products that your robo-advisor offers. For instance, they may not suggest a Public Provident Fund (PPF) to you.
In arrangement with HT Syndication | MINT
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