One of the major disruptions witnessed by the BFSI sector, including the financial services industry, is the rise of robo advisors. Bots that chat, algorithms that present statements, and pull up product information from databases are already taking up roles in customer service centres. Most banks these days have a bot avatar on their social or digital channels.
Data from statista.com reveals that assets under management (AUM) under the robo advisor segment to worth USD 20m in 2018 with the number of users in the robo advisor segment to reach 0.2m by 2022. With robo advisors perceived as key disruptors in the industry, the question is, “Can they replace humans?”
Here are some opinions:
Relax ! It Counts to Be Human
Relationship-based customised advice is one of the fundamental pillars of the financial services industry. Every individual is different in term of risk profile and financial goals. What may be suitable for A, may not be apt for B. While robo advisors can provide inputs using certain inbuilt logic and thumb-rules, for a customized financial plan, you still need an advisor.
Complexities Warrants Empathy
While thumb-rules may suffice in scripted or pre-empted situations, for complexities involving human emotions, personality types, and investment preferences, one needs human intervention. A human mind is far more adept at addressing complex life situations and customizing solutions based on non-verbal cues like client’s body language, perceptions, reservations, and knowledge.
Humans are more competent to keep investors calm during a market downturn
Markets are cyclical in nature. During a bull run, investors are happy to pump money into the market. However, the real test of character is during a downturn. Many investors tend to panic during a downturn, which is actually a market correction, and pull out their investments. This not only erodes wealth but also jeopardises critical financial goals.
It’s during such times that human advisors are more competent to allay fears and prevent investors from making a hasty decision. Robo advisors can do precious little in uncertain times to pacify nervous investors.
Robo Advisors As Assistants
So, where does the utility of robo advisors lie? Robo advisors can work with humans, acting as smart assistants at the backend. They can be utilised for repetitive tasks such as managing database, preparing, and maintaining documents, populating forms, and handling common client queries among others.
All of these will free up time for advisors and distributors, so that they can focus on analysing client portfolios, bringing new business on board, and developing strategic offerings for their clients.
With technologies such as AI, Big Data and Blockchain going to be the major disruptors for the industry, it’s time for financial distributors and advisors to embrace robo advisors and use them to automate mundane tasks, thereby focussing more on core activities.
IDFC Mutual Fund has a flourishing network of financial advisors, CFPs, banks, financial institutions, advisors, tax consultants and CAs.
Join us to learn more.