Robo-advisory is the future. It's the shiny new investment platform which makes investing so easy. Did you ever imagine that one day computers could replace humans and give sound financial advice? Robo-advisors aim to do just that. You live in interesting times...
Wondering what are robo-advisors? I'll explain. Robo-advisors are algorithm based financial services offered online and have little or no human intervention. The algorithm collects personal information from you and other investors like age, salary, financial goals, gender, sources of income and so on to give you sound investment-based advice.
With a robo-advisor, a certain mathematical equation tries to figure out your risk profile (whether you are willing to bear high risk or whether you are risk-averse) and also looks at other factors. The robo-advisor then gives you customized investment advice on where to invest.
Now to the big question. Are Robo Financial Advisors good for you? Want to know more on tax planning? We at IndianMoney.com will make it easy for you. Just give us a missed call on 022 6181 6111 to explore our unique Free Advisory Service. IndianMoney.com is not a seller of any financial products. We only provide FREE financial advice / education to ensure that you are not mis-guided while buying any kind of financial products.
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Robo-advisors help you with retirement planning, financial planning, investment planning and even tax planning. Before I answer the question, are robo financial advisors good for you, lets first understand how robo advisors work.
1. How Robo-Advisors work?
The robo-advisor asks you about yourself, the amount you can invest, your risk tolerance (whether you are willing to accept risk or are risk-averse), the amount you can invest and so on. You will have to answer a detailed questionnaire which assesses your risk appetite, financial goals, saving and spending patterns and asset/liability position.
The robo-advisor uses precise tools to give you personal financial advice and recommends a portfolio. (Where you should invest and how much).
The robo-advisor invests your money in the recommended portfolio under your name, giving you full control.
It is popularly beloved that robo-advisory is cheap. If you don't have much money (Assets you own are of low value), you must go for robo-advisory services. This is wrong.
You must opt for robo-advisory services only if you have thorough knowledge of financial products and understand different risks involved in investing.
The robo-advisor asks you a single set of questions and cannot accurately judge the risk you are willing to bear. This can be disastrous if you are new to investing or don't have knowledge on financial products.
3. Robo-Advisor lacks the human touch
Lets understand how a robo-advisor works. You simply enter details like income, expenses, financial goals and so on. The robo-advisor then gives you the numbers. It tells you how much you need to save and invest monthly or yearly to attain financial goals.
Financial planning is not just saving and investing. There is estate planning, tax planning and even insurance planning. A robo-advisor can definitely help you start, but if you want proper financial planning, you need the help of a human financial advisor.
Then there's motivation. A financial advisor can persuade you or push you to start investing and saving. The robo-advisor is no match here.
When it comes to investing in equity mutual funds and stocks, you definitely need a financial advisor. If you are new to investing, the financial advisor can help you invest when stock markets are down or even advise you on when to book profits to attain financial goals.
A good financial advisor easily beats a robo-advisory service. However, it's very important that the financial advisor gives unbiased advice and doesn't chase monetary gains or indulge in mis-selling. Be Wise, Get Rich
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