5paisa uses the concept of automated advisory for clarity, convenience and cost effectiveness

Prakarsh Gagdani

When it comes to investing, an ordinary person gets multiple advice on multiple aspects from different influencers – friends, family, peer group, known certified advisors and lastly the broking organisation which does the transaction. It is to break this clutter and noise that professional, analytical, data-backed and yet customized advice is such a valued input.

This is where the value of robotics comes into play. Let us understand what exactly the investment advisory process involves. First is customer profiling which involves analysing the income, liabilities and outgoings, the investible surplus, the long-term goals and the immediate constraints. This is processed into an investment plan, with asset allocation. Within each asset class, proper securities are selected from a risk perspective. Beyond that is the execution, which is primarily the process of creation of client account and execution of the investment plan. Last but not the least come periodic reviews, alerts, re-balancing of portfolio and timely encashment in line with targets.

Robotics technology supplements or substitutes the expertise in all this and enhances investor experience on many counts. In robo-based advisory, customers put in information online and the system generates investment options. With an automated process there is greater ease of understanding for the investor. Also, the investor can access information anytime, as well as pre-program transactions which are executed during exchange timings.

A strong analytical basis enables proper short-listing and risk-evaluation. As human interaction is minimal, bias and sentiment are largely eliminated. Likewise, the response to change in market conditions is quick and in line with the long-term objectives. Therefore, robo-based advisory offers the combined advantages of convenience, clarity and cost-effectiveness.

The concept of robo-based advisory is growing rapidly and is expected to be responsible for about 10% of AUM worldwide by 2020. Santosh Jayaram, product head at 5paisa explains, “In India almost 25% of mutual fund purchase is being done through digital platforms. Assets under management under robo advisory segment amounts to roughly $7 million in 2017 and is expected to grow at almost 100% for the next 5 years.” Global estimates for funds operated by totally automated services vary between $50-70 billion this year, up from a mere $19 billion in 2015. One estimate suggests that funds advised by hybrid robo-human services would grow to $16.3 trillion worldwide by 2025.

5paisa.com is one of the pioneers in India to offer such advisory services under the Robo advisory brand to customers at no added cost. 5paisa.com is also one of the first in the industry to offer automated advice for mutual fund and insurance investments. Since 5paisa.com is a discount broker, customers can transact end to end from advisory to execution at the lowest cost across the entire industry. It is essentially a technology-driven, low-cost option for the investor seeking advice on different investment options from a single source.