Primarily because of our busy routines, many of us base our decisions on the convenience factor involved.

My mutual fund distributor gives me excellent service; he fills out all the application forms on my behalf.

But does that translate into better returns?

With changing times, automated investment platforms—also called as robo investing platforms—are replacing mainstream distributors and mutual fund advisors. Robo advisory services are better and quicker in comparison to what’s offered by the human advisors and distributors.

Unlike a human financial advisor, you do not need to fix an appointment with robo advisor. You just need to log in to your account, submit your information, and your financial plan is generated in an instant.

The most beneficial aspect of this service is that it’s available 24x7 and without any behavioural bias.

With robo advisory, your mode of investing can shift from signing and submitting paper forms to simply entering a transaction password. Thereby, enabling you to save and invest in financial products such as mutual funds in an automated manner.

There are four main reasons why robo-investing is gaining popularity:

1. Unlike financial advisers who often have discriminating policies for smaller investors, robo-investing platforms treat all investors the same.

2. They offer a reasonable level of customisation in portfolio construction at an affordable cost.

3. Robo-advisors construct an asset allocation strategy through a portfolio of mutual funds taking into account one’s risk appetite and the time horizon to stay invested.

4. Since the portfolio construction and review does not involve human intervention, there is no room for bias or speculation.

How dependable are Robo-advisory platforms?

Robo-advisory platforms have made sensational debuts, with more burgeoning everyday. But what is the quality of the advice they offer, and how much of this is added value to investing is the core question.

At present, most robo advisory platforms are focusing on the look and feel, rather than offering unbiased advice backed by thorough independent research.  For them, recommending mutual fund schemes is a secondary task that needs to be done to achieve the primary objective of distributing mutual funds.

Remember that, if recommendations aren’t backed by sound research processes, they are unlikely to live upto your expectations.

So, here are few questions you must seek answers to:

• Who are the people (founders/promoters) behind the robo-advisory platform and what's their experience in the field of personal finance -- their investment ideologies?

• What are the services they offer –– whether only mutual fund related or a full-line; viz. financial planning and investment planning among others?

• What is the technical competence of the team?

• What are the processes and systems the robo-advisory platform follows to recommend mutual fund schemes?

• What are the qualitative parameters used, if any?

• Are they unbiased and independent, or working for commissions?

• How transparent are they while charging you?

• What is their track record?

Remember, a robo-advisory platform should put your interest at the fore. After all, you want effective recommendations and efficient service and not just a stylishly designed robo-advisory platform.

In addition, consider this:

Without any doubt, a robo-advisory platform makes your life easy, but that does not mean that all will be transparent and more competent than human investment advisors.

Don't forget, machines do not have cognitive abilities. It's the human being who feeds the input. And the quality of the output depends on the quality of input.

Therefore, it is important to judge if a robo-advisory platform offers research-backed recommendations. After all, it is the question of your hard-earned money.

[Read:  How To Judge If A Robo-Advisory Platform Is Competent To Offer Sound Advice]  

Note that the boom in robo-advisory is attracting many fin-tech startups and mutual fund distributors to launch their robo-investing platforms. But, as a prudent investor, you ought to judge who is really working in your interest.

Apart from research-backed recommendations, if a robo-advisory platform is really looking at your interest first, it should offer only Direct Plan to invest in mutual funds and not Regular Plan. 

[Read: Everything You Need To Know About Direct Plan of Mutual Funds]

‘Direct Plans’ facilitate you to invest directly in a mutual fund scheme without routing the transaction via a mutual fund distributor, and it is open for all categories of investors. A distinguishing feature about Direct Plan is the lower expense ratio (compared to a Regular Plan).

Hence, the NAV of a Direct Plan is higher than a Regular Plan. And do note that the portfolio is the same for a Direct Plan and for a Regular Plan of a mutual fund scheme.

Some of the benefits of opting for Direct Plans are:

✔ You avoid the rampant mis-selling that goes on in the greed to earn more commissions.

✔ The cost of investing in a Direct Plan is inexpensive owing to the lower expense ratio.

✔ The lower expense ratio facilitates you to earn extra returns over the long run (see chart below).

[Read: How Even 1% Difference In Expense Ratio Can Make A Huge Difference To Your Investments]

Hence, if you wish to reap the sweet fruits of healthier returns with the power of compounding, Direct Plans are for you. Both lump sum and SIP (Systematic Investment Plan) investments can be done in a Direct Plan of mutual fund schemes.

Honestly, every investor should opt for a Direct Plan to invest in mutual funds. They are best suited in the journey of wealth creation.

[Read: How To Create A Portfolio Of The Best Mutual Funds With Robo-Investing]

A robo-advisory platform offering Direct Plans to invest in mutual funds work on a fee-based model. The recommendations provided are uninfluenced by commissions and, hence, are unbiased; they put your interest at fore. 

Your long wait for such an ultra-reliable robo advisor is about to end soon.

‘PersonalFN Direct’ will be launched on July 2, 2018.

It will be backed by honest and unbiased research that has outperformed the S&P BSE-200 index in last 15 years by over 80%. It will offer only Direct Plans which may potentially fetch you an extra return of as much as Rs 30 lakhs in 30 years...

Here are 5 Reasons to opt for PersonalFN Direct:

Reason #1: It offers only DIRECT PLANS

Reason #2: Offers customizable investment solutions based on your risk profiling

Reason #3: It brings outstanding research experience of over 15 years.

Reason #4: Minimal paperwork and ease of transacting

Reason #5: It comes at a pocket-friendly price

PersonalFN has consciously tried to keep the whole process simple. You just got to follow these simple steps:

✔ Complete the registration

✔ Submit the necessary documents to activate your investment account

✔ Assess your risk profile

✔ Get a recommended portfolio based on your inputs

✔ Invest with a single click

And if this isn’t simple enough, be rest assured that our dedicated representatives will handhold you through the process.

Happy Investing!

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