Will Robo-Advisory Firms Be Able To Dent The Traditional Advisory Segment?

Robo-advisory firms are riding on their artificial intelligence-driven systems to dish out quick financial advice. Bereft of any human bias or emotion, will they be able to dent the traditional advisory segment?

- Ashish Rukhaiyar

“GREED, FOR LACK of a better word, is good. Greed is right, greed works,” goes the famous line said by Michael Douglas in the Hollywood movie Wall Street. The dialogue has assumed cult status ever since it was said in the 1987 movie, and has been widely and frequently reproduced in various forums on investing in the stock markets. Greed—and fear—are probably the two most common human emotions that are talked about in the stock markets even as many believe that trading is best done without any ‘emotional guidance’ at play. Keeping out emotions or biases while picking up the best stock or sector was not possible till a few years ago, as the analysis was done by humans. But the idea to keep out emotions was always in existence. Finally, an industry emerged that showed human emotions the door while enhancing the speed of analysis and, more often than not, at a lower cost structure as well.

Robo-advisory has been in existence for a few years and while it is already a huge industry globally, it is picking up fast in India as well. Simply put, robo-advisory refers to the digital platforms that provide financial advisory services based on completely automated, artificial intelligence (AI)-driven software with almost zero human intervention. While the code is developed by humans, the parameters or filters that it uses to pick the right stock or even suggest replacing an existing stock in one’s portfolio with another is based completely on factors related to valuations, governance and performance, among other things.