(I write this post in response to this question, which has been asked too often.)
What’s a robo advisor for investments?
A robo advisor is a service with a significant use to technology to help advisors manage their money and investments. It uses pre-defined algorithms to select and recommend investment portfolios. It asks the user several questions, based on the answers of which, it defines a mix of equity, debt and cash. Subsequently, it offers one of its pre defined algorithm driven portfolios.
A robo advisor also keeps a track of your portfolio progress and does automatic rebalancing of your investments to maintain the asset allocation.
There is no or very little manual intervention when you use a robo advisor. The robo does everything with your money including using tax saving methods and generating the most optimum return. And that is touted as its biggest benefit.
Emotions and irrationality are replaced by a scientific process of investment portfolio management and is expected to yield better results for you.
So, how many robo advisor offerings are there in India?
Take a guess.
My answer – None. Zero.
While a large number of companies claim to offer robo-advisory, there is no true robo-advisor in India.
The ones who are there do only very few things like a robo-advisor:
- Have an algorithm to select and shortlist funds and create portfolios
- Suggest suitable asset allocation.
- Send you regular alerts including about change in asset allocation
- Share insights and portfolio reports
Beyond that, you have to take action yourself. Login into your account and invest, switch or sell, etc. There are approvals that you have to give at various steps to keep the process moving forward.
For example, while you get timely alerts about rebalancing, you execute the advice.
The system can warn you about tax implications but you need to take the actions.
Now, why is that?
Well, the limitation is the result of the current regulatory rules. There is a hope that as times progress, the regulation will give a lot more leeway to be a full fledged robo advisory just as their counterparts abroad.
So, where does Unovest stand? Is it a robo advisor?
Here’s the most important thing – Unovest is NOT a robo-advisor.
Yes, we have an online platform where you can create an account, upload your existing MF portfolio as well as transact in direct plans of mutual funds.
You can see various reports, set your goals, and track them all online. This is something any website can do.
You can see various portfolios of mutual funds, select and transact in them.
And yet, we are not a robo advisor.
Let me explain.
Unlike robo advisors, we do not run machine driven algorithms that filter mutual fund schemes for you or prepare portfolios.
Actually, we do it all of this ourselves. Much like a craftsman, we go around looking at several schemes, filter them and then select the ones which we think should find a place in your portfolio. This is both a quantitative and qualitative process.
And as you have been reading in the various posts here (as also the eBook on Bogle’s 8 rules, I shared with you recently), we let the past performance not become a significant influence in the decision.
We focus on the approach, the mandate and the consistency of execution.
Some of the largest and most famous funds do not find a place in our portfolios. Yes, surprise!
Coming back to the robo discussion, we further organise the MF portfolios neatly into an array based on risk tolerance and time horizon.
We give you a short questionnaire that helps you assess your current risk profile. It also suggests you an asset allocation that most likely fits your profile.
And of course, we send you alerts about any portfolio updates too.
Well, that’s a given. These are basic features. In fact, lot more needs to be added.
Unovest stands for something else. It is in the human interface. The handholding and the support we provide to our users is something we have heard good words about.
Step by step, we answer queries that you ask, guide you when you are stuck and help you move forward with your investments.
The discussions go beyond just MF investments or online transactions. We are happy to take on all your queries.
We even question you and your choices. It is a healthy discussion where you end up richer not just by money but also knowledge.
So much so that we get to read awesome feedback by users such as you.
This is the most important thing for us.
And as you would realise by now, this kind of support and involvement is considered more valuable than a pure robo advisory.
We don’t earn any commissions or any other revenue from anywhere else. The advisory fees that you pay is the only thing that keeps us going.
Now, if you compare Unovest with any other robo advisor, it would be unfair to the other party.
That was it from our side. I hope you see Unovest in a new light and make use of it accordingly.
If you have further questions, do send across.