Over the next 10 years, delivery of financial services in India will undergo a dramatic change. Everything you need will be at your fingertips, on your smartphone. No more awkward visits to the bank. While pessimists may scoff at the idea of technology making the big difference, remember the experts back in 1998 who wrote off cellphones as luxury.
In India, less than 1% of the population has access to quality financial advice. Fewer than 5,000 professional advisers are meeting the growing need for personalized financial advisory. The existing professionals offer their services through wealth management companies or mom and pop financial advisers. Even then, their reach is limited to HNIs and those who can afford their fat fees. This leaves the middle and upper middle class—the growth drivers—to fend for themselves. Often, the lack of access forces the middle class to rely on ill-qualified pseudo-advisers, who only destroy their wealth. In India, less than 3% of the population invests in financial markets. While there is a clear need for advice, access is missing. This is where robo-advisory comes in. Robo-advisory allows every individual to save money irrespective of how much he or she earns. It means access to quality advice that was once limited to the super rich, at a fraction of the cost.
By using online technology and offline support, a much larger segment of the population can access quality financial advice, taking the right decisions with professional help. Robo advisers reach out to the semi-urban and rural populace as well. Both developed and developing markets are experiencing robo advisory, which is cost effective, transparent and unbiased. In developed markets, the key driver of growth is the cost of managing money.
The investment ecosystem is very different in developing markets like India. The key driver to growth of robo-advisory in developing markets is providing access to advice. This is why I believe robo advisers will have a large and profound impact on India.
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Mr. Nitin Vyakaranam’s view is published on ET Wealth (14th December 2015).