The 2nd evolution in Robo Advisory has begun. The 3rd evolution is not too far.

And that’s when it will be more exciting for Human Financial Advisors…

This is our 3rd article on Robo Advisory.

The 1st one was written in November 2014, a little ahead of the Robo Evolution (1st phase) in India. This article was more of a thought leadership and emerging trend kind of content.

The 2nd article was more of an Anti-Robo through which we were questioning the `Robotics Advisory’ efficiency of these firms. In our opinion, none of the Robo Advisory firms in India were really qualified to be in the genre of `Robotics’, in its strictest sense. Everyone had a primitive Risk Questionnaire or a Goal Form through which they hoped to understand an investor profile and therefore suggest a suitable portfolio. We debated that there was nothing `Robotic’ in it.

In this article, we will discuss the evolution and our belief of how it’s going to be playing out, in what we call the 3rd phase. The scope of the evolution is strictly confined to the Business Models and not in totality.

The 1st Robo phase in India started in early 2015. It was the Innovators/Risk Takers who jumped in & started building systems to attract Investors. Presence was more on the web & less on mobile. There were strictly no target audience that these firms had in mind. Like millennia’s etc. It was just general investing public. Build up costs were comparatively lesser as compared to 2009-10 & APIs were getting familiar. One interesting aspect was, it was mostly techies that was getting into this space then. It quickly followed by high profile domain people joining the bandwagon. A mix of Tech & Domain as a Promoter Team was hard to find and existed as an outlier. Folks from Tech focused from User Experience while the Domain guys focused on Functionality. Towards at the 1st quarter of 2016, there were about 75 – 85 Robo Systems at different stages. Many fizzled out eventually. Some stayed put. Few were lucky to have raised capital.

One thing was profoundly common – Client Acquisition was the Biggest Challenge. All the systems that got built in the 1st phase had no clientele as they started and went aggressively scouting for clients. And almost all the systems in the 1st phase had only Mutual Funds as a product offering.

Then came the 2nd phase.

As any evolutionary process, the subsequent stages would always correct or learn from the mistakes of the previous stage. This was no different. If client acquisition was the biggest challenge in the 1st phase, businesses were quick to realize this gap & address this issue. How? Systems with existing clientele/users were now getting into Robo Advisory. These systems had users in Payments, Loans, Insurance and anything that’s remotely finance. They smelled the opportunity and started offering Investment Solutions to their users. And yes, the product was Mutual Funds. Since these players were already sitting on existing user base, cross selling was less of a challenge than fresh acquisition. From an Advisory point of view, there was not much elevation from the previous stage. This time, it was more on mobile than on web.

The 2nd phase is now catching up like wildfire.

Before we come to what we believe the 3rd phase is going to be, there was 1 segment which witnessed the Robo Evolution and this is the segment that we believe is going to drive the 3rd phase – Human Financial Advisors…

This phase, called as the Hybrid Model has started emerging in the west. Quite a good number of Robo Platforms tweaked their systems to accommodate Financial Advisors.

How is this evolution going to pan out?

What’s in store for Human Financial Advisors?

What’s in store for Clients?

Would it the last phase?

For trends, answers & perspectives, please watch this space closely. We shall return soon…

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