By Uma Ganesh
With AI having invaded every domain, the roles of professionals are being redefined or becoming redundant. Financial advisors have been rendering support traditionally in the areas of wealth management, investment options, tax planning and retirement planning. The advent of AI in the domain raises questions about the comparative effectiveness of financial advisors and the autonomous or robo-advisors.
To begin with, AI-powered financial advisors as a commercial proposition are very attractive as services could be provided at much lower fees than traditional advisors. Further it is possible to access them anytime, anywhere without any constraint round the clock. Huge amounts of data are possible to be processed at a rapid pace and deep insights can be made available without any biases, customised to the individual goals of investment and risk appetite.
With the help of machine learning and predictive analytics, AI-powered platforms are able to provide useful trends and insights to the investors enabling them to make appropriate investment decisions. Robo advisory services being provided by platforms such as Zerodha’s Nudge or Groww’s are being tapped by retail investors as well as experienced traders for their transactions in capital markets at affordable costs. Such tools have democratised the investment landscape in India, disrupting the wealth management arena, which was traditionally focussed on high-networth individuals. Youngsters are comfortable with the use of mobile apps and payment platforms that provide them with easy and direct access to investment options.
The robo-advisory market in India is expected to grow at a CAGR of 33.4% from 2023-2030, generating a revenue of $2,155 million by 2030. However, investors have to be mindful of the potential biases. AI-powered advisors are also susceptible to fraud and unethical hacking and are not yet fully integrated with the banking infrastructure. Regulatory controls are emerging but compliances still do not cover most of the potential scenarios as the comprehensive implications of risks are yet to emerge.
In the future, we would see integration of diverse financial instruments and investment avenues, thus leading to the emergence of comprehensive automated wealth management platforms. Investment banks with full fledged automation may also be able to offer wealth management solutions making the advisory recommendations more powerful and pertinent to the investors.
Even with all such advancements, human advisors cannot be completely eliminated. Human advisors would certainly benefit by the automated support from the AI powered systems that would help speed up their recommendations and make guidance pertinent to their clients.
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