Robo Advisory – Paving its way in wealth management

CXOToday has engaged in an exclusive interview with Anu Khanchandani, Co-Founder at Fintoo


  1. What is the biggest challenge in Robo Advisory?

Ans: The biggest challenge in relation to Robo Advisory is of course, the trust factor or behavioral biases. After all, we are talking about handling people’s hard-earned money. It is difficult to convince people that technology, which is empowered by data analytics and artificial intelligence, which is based on human logic, is capable of guiding them through their financial roadmap.

CAC (Customer Acquisition Costs) are also higher since the nature of DIY (Do-It-Yourself) Robo Advisory services entails targeting a mass tech-savvy audience. Outreach costs of such campaigns are initially high.

Awareness about the fact that even a little advice with regard to your wealth can make it grow exponentially is missing. Creating that kind of awareness first is more important than creating Robo-advisory platforms and thrusting them in the face of users who don’t even know what purpose they will serve or what problems they will solve for them.

Last but not the least, data privacy is a concern not just in Robo advisory but across all technology-powered platforms. More so in the case of Robo advisory since some level of personal details are required for a Robo advisory platform to map one’s assets to their goals and give them a holistic picture of their wealth and further advice related to it.


2. What role does technology play in Robo Advisory?

Ans: Artificial Intelligence, used as a top layer over legacy portfolio management theories developed by mathematicians, can revolutionize the Robo Advisory industry. So much so, that behavioral finance is a theory in itself that closely resembles the way humans think about their finances. Understanding these fundamentals and moulding them into a technology framework is the need of the hour where Robo advisory platforms are concerned.

To curb high CAC (Customer Acquisition Costs) for Robo advisory target audience reach, technology can play an important role. If used smartly, automation can be a game changer in churning the existing customer base for subscription renewals.


3. What do you think is the future of Robo Advisory in India?

Ans: In the present scenario, Robo Advisory is a misunderstood term, not just in India, but even globally. Goal-based investing is often given the label of Robo advisory in the present scenario. However, Robo advisory is more of a personalized and custom advice that is very specific to an individual, his/her income, expenses, assets, liabilities, and goals from a holistic point of view. Goal-based investing, on the other hand, which most platforms label as Robo advisory, are pre-made investment baskets for various goals.

However, the platforms are now maturing and moving towards providing advice and portfolio monitoring as a whole in a customized fashion. However, behavioral biases in terms of trust in human advisory and data privacy concerns are hurdles for the concept of Robo advisory that will take time to overcome and gain decent traction in India. Till it becomes a norm, just as it is in countries like the U.S. and the U.K., Robo will have a slow albeit steady growth in the Indian market.


4. How has the move to online platforms during the lockdown contributed to the growth of the Robo Advisory industry in the last 18 months?

Ans: Lockdown forced people to use online platforms for everything, be it buying groceries to investing online in mutual funds or stocks. Besides, the time that people had on their hands enabled them to explore more and better ways of investing and making their existing money work to make more money. Demat account openings hit a record of 14.2 million in FY 2021.

And it was this fervour of investing online that raised the question of advisory before investing in their minds. Peer advice became the most powerful tool for investing because many people had joined the bandwagon and free advice was available everywhere. Sometimes it worked, and sometimes it didn’t. It was when it didn’t that the awareness of advice came into being. At that point, coming across an ad that said, “Don’t know where to invest? Ask Fintoo,” instilled a sense of relief in investors’ minds.  An assurance that there was a Do-It-Yourself platform that had a deliverable Financial Plan or a Roadmap that could give clear information on where their hard-earned money could consistently generate enough revenue to fulfil their goals.


5. Do you see more traditional wealth managers moving into the retail and online wealth platform space? Are the lines blurring between the two markets?

Ans: In 2021, ThoughtLab conducted a survey of 2,325 investors and 500 wealth management firms worldwide. There were 6 major points related to the shift in investor trends which will clearly indicate a need for traditional wealth managers to move into the retail and online wealth platform space.

  1. Digital mindset because of the pandemic: 40% of investors said digital access has become a greater priority because of the convenience it provides.
  2. Investing for social good: 32% of boomers plan to invest in environmental, social, and governance(ESG) funds vs. 22% of millennials and 63% of billionaires.
  3. Diversification of wealth: In two years, 67% of investors will want to invest in alternatives, 49% in IPOs, 47% in tax-exempts, and 45% in commodities. All of this will need diversified advice in an easily accessible way.
  4. Unbiased advice: About 50% of investors said that acting in their best interests would be the most important criteria for them to select an advisory firm. Robo advisory powered by AI does just that and more.
  5. Reasonable fees and greater transparency: Only 37% of investors think advisors’ fees are justified. Only 35% understand the fee structure, which involves complex financial terminology.
  6. Greater competition: 33% of investors moved 20% or more of their funds to providers that offered what they were looking for in terms of advisory.

There arises no question of the lines blurring between the 2 markets since these aren’t 2 different markets per se. They are the same people who initially established personal relations and provided advice offline. Considering the shift in investor trends pointed out above, this segment will have no choice but to add an online component to its existing traditional way of operating. The legacy business operations will remain for the personal touch aspect of wealth advisory but will definitely need to be assisted by an online platform to adjust to investor expectations.


6. Which types of clients Robo Advisors are having the most success attracting to their platforms?

Ans: In India, millennials are 34% (at 440 million) of the country’s total population. Our traction data at Fintoo clearly shows this is the target audience that has subscribed heavily to our Robo advisory platform.

The high earning potential of this generation and the open-mindedness in terms of adopting digital platforms have been the greatest factors in attracting them to Robo advisory platforms for managing their wealth. This is the section of the target audience that does not mind spending time and effort providing data on a DIY (Do-It-Yourself) platform and generating a Financial Roadmap as long as the fees that they have to pay for this service are reasonable.


7. What was the reason behind moving to online wealth management from traditional space?

Ans: The traditional space did have a personal touch to each and every client that the Fintoo Wealth Experts interacted. However, the potential that an online reach offered was something that we could not resist. Again, the pandemic changed the behavioural attitudes of clients, who now preferred the ease of access to their wealth portfolio, be it in terms of transacting or just analyzing it to make better decisions.

In 2015, we had to digitally enable our traditional advisory in both aspects – Online investing and online advisory. We also moved our marketing efforts to the digital space because of the reach that it gave us. Operations became much easier even for assisted advisory because it became a norm to speak to advisors on video conferences, thereby making it easier for us to acquire clients from other cities across the country.


8. Do you think Robo-advisory will replace assisted advisory services in the coming years?

Ans: Assisted advisory is here to stay.

The personal interaction level that a human advisor can provide is unmatched to any AI-based automated Robo advisory platform. So replacement is out of the question.

However, we can look at Robo advisory improving assisted advisory services by reducing the burden of manual activities like client onboarding. This is an activity that can be completely digitized so that the assisted advisor can focus on providing advice rather than following up to collect documentation. The power of Artificial Intelligence (AI) can establish the base needed for advice to which the assisted advisor can add his/her two cents to give it the edge that probably HNIs and UNHIs look for to manage their massive wealth.


9. Is Robo advisory the future? Where is it heading?

Ans: As per the data from Statista, in 2022, the AUM is expected to be $1.787 trillion globally for Robo Advisory services, while the figure stands at $ 16.912 billion for India. The size of AUM for Robo advisory is expected to be $2.842 trillion globally by 2025.

These statistics definitely look promising for the Robo advisory landscape. The surge of Robo advisory platforms in India in 2022 is an indication towards this trend. However, having said that, there is some way further to go before the Indian investor opens his/her mindset completely to an AI platform advising them on their hard-earned money.

However, if Robo advisory platforms enable themselves to a level where they can start answering questions like “Do you think I can retire early?” or “I received a bonus. Which life goal should I align it with?” how long could you keep an investor away from the urge of using such a platform which makes life decisions easy!

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