Ultra-HNIs not keen on robo-advisors: report
Top of the Pyramid report by Kotak Wealth Management said that while robo-advisory has become fairly popular with investors in developed countries, it is at a very nascent stage in India
When it comes to managing finances, robots don’t appeal to the super rich, yet. Most ultra high net worth individuals (HNIs) in India are still unfamiliar with robo-advisory services, according to Top of the Pyramid report by Kotak Wealth Management, which was released on 13 February 2018.
The report is based on a survey that was carried out by the wealth management company between July 2017 and September 2017. Its findings in the report show that almost 66% of the respondents were unfamiliar with robo-advisory services.
The survey covered over 200 ultra HNIs, including clients of the firm. The ultra HNIs surveyed were households with a family wealth of at least Rs25 crore.
The report said that while robo-advisory has become fairly popular with investors in developed countries, it is at a very nascent stage in India. “Indian ultra HNIs still prefer traditional wealth management services, which allow them to interact with their wealth managers,” the report noted.
While 34% said that they were aware of what robo-advisory services were, most had not used these services. Of those who had, about a quarter cited ‘saving time’ as a key driver for engagement.
Why HNIs don’t like robo-advisors
“It will be a long way before ultra HNIs warm up to robo-advisories because their needs are complex.... The investment strategy has complex structures and hence they need specific advice. Robo-advisories can, maybe, form part of their advice but can’t replace wealth managers,” said Sunil Sharma, chief investment officer, Sanctum Wealth Management Pvt. Ltd. He added that even in developed markets, very few have made progress in robo-advisory services. “This service has been around for at least 7 years. However, only 2 or 3 companies in the world have made any major advances,” said Sharma.
In India, robo-advisory businesses are mainly focusing on the retail segment. “The product is designed for young earners—the average age group is about 30 years. I have customers who invest Rs3-4 lakh a month too, but this segment is very small. Robo-advisory is targeted to this younger segment. However, the product is sophisticated enough to be used by ultra-HNIs,” said Sanjiv Singhal, founder and chief operating officer, Scripbox, an online investment service, but he added that it’s unlikely that the focus will shift to ultra HNIs. “Some people will adopt on their own. But as a strategy, we are clearly focused on young earners because that is the segment that needs help,” said Singhal.
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