Mohit Gang
World over various bastions of traditional financial services are getting challenged by new-age Fintech models. Be it payments, lending, credit checks or wealth management – every aspect which was hitherto considered a forte of large financial institutions is facing disruption.
Personal finance is one such space which has been a long cherished domain of banks with large distribution muscle and captive client base. Banks rule the roost here followed by large NBFCs and local distributors rooted in every nook and corner of this country.
But technology seem to be permeating the personal finance space which is considered by purists as a business driven by personal relationship and advisors sitting across the table, analysing portfolios and helping clients chart the right future with their hard-earned money. However, this model comes with its own commission-centric structure. It’s a reality that clients pay a huge sum for financial products and the advisory thereof, and distributors or intermediaries make huge commissions.
With the growing cost of brick-and-mortar model and highly paid advisors, it’s only natural that this process gets automated, simple and most importantly cost-effective. Today, there are complex algorithms to assess a client’s risk tolerance and his financial needs. Clients can pin their goals and have a unique plan for all their ambitions. Technology not just analyses a client’s financial needs, but also helps him/her create a plan which is best suited to their appetite. To top it up, investment recommendations are not influenced by humans anymore, they are all algorithm driven and statistically derived. Today, sophisticated algorithms are available which can take multiple variables into account and recommend best possible financial solutions to clients. Clients no longer have to trust their hard-earned monies on whims and fancies of individual advisors. They can go with system driven solutions which are devoid of all human bias and are better suited to market vagaries. Above all else, this complex modelling takes care of not just returns but risk adjusted returns for multiple human profiles.
Welcome to the age of robo-advisory, where every financial decision is guided by machines, driven by data and is an outcome of complex number processing. There are many platforms in India which offer these services to clients both for stocks and mutual fund investing. In fact few of these platforms have moved the needle to other extreme by not just offering robo-advisory solutions but also offering products like ‘direct plans of mutual funds’ which has no in-built commissions and delivers superior returns for clients.
Part two of the robo-advisory is now about to play out – where chatbots will take over human advisors, talk to clients, listen to their needs and dole out solutions which are as customised as it ever was. Worldwide artificial intelligence driven or AI-based bot solutions are taking over complex tasks and processing information much faster than any human interface could. It’s not just about quick processing but also about convenient and correct processing. AI based solutions are gaining currency in markets like the US & UK, and are about to make inroads on Indian shores.
Today at the touch of your mobile, you could customise your financial goals, get appropriate asset allocation models, figure out correct investment products to invest and finally transact on the move. And all this without letting needless commissions eat into your returns. Future of personal finance is not in lengthy excel sheet driven discussions but on personal hand-held phones where chat-bots are waiting to answer all complex financial questions, one might have!
(The writer is CEO and Co Founder of Moneyfront.in)
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