Even today if you call up a financial advisor and ask for your ideal debt/equity mix, the immediate answer will the (100-age) formula. What this formula says is that the equity component in your portfolio should be the difference between 100 and your actual age. For example, if you are 30 years old then you should have 70% exposure to equities and the balance in debt. On the other hand if you are 60 years old then you should have 40% exposure to equities and the balance in debt. Frankly, this rule does not have any scientific basis although it does appear to be intuitively correct. While it is true that your risk appetite reduces with age, using this kind of a template is hardly a scientific approach.

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Another typical template approach we often use is to classify equity funds as high risk, debt funds as medium risk and liquid funs as low risk. While intuitively this could be correct, it again risks generalisation and over simplification of financial advice. As millennial investors increasingly enter the market for financial advice, it calls for a fresh, in fact, a radical shift in thinking by brokers and financial advisors.

The need to go beyond template advice: The pie-chart indicates how demanding the millennial investors across the world are going to be. For example, the millennial investor is not interested in an off-the-shelf low cost solution. In fact, just about 7% are willing to opt for the lowest cost solution. If you look at the percentage of millennial investors who are indifferent to price, that is just about 28%. They are willing to accept quality advice that is directed towards their goals, irrespective of the price. But a large 65% majority are extremely value conscious. They want the solution to fit their goals perfectly at the lowest possible cost. You have to go beyond template advice if you are looking at targeting the millennial investors. The answer lies in technology-driven customisation.

Millennials need solutions that are seamless and paperless: When millennial investors look for financial and investment solutions they look at solutions that are seamless and paperless. They do not require paper filing ideas and reams of printout. Give the trees a break! How about delivering the solution online, maintaining documents in e-lockers, using a fine file classification and sharing tool and let them back it up on their mobiles using their cloud storage Dropbox. Above all, let it be seamless. From the mapping of the client to the investment mix analysis to the fit mapping to the execution; if the entire activity can be handled without breaks and hassles it would be better.

Solutions need to be instant; at the click of the button: We are talking of instant solutions ,not of quick-fix solutions. What millennial investors want is quick answers. But these answers must be backed by intense data mining and data mapping. Obviously, that kind of data cannot be handled by the human mind or even by plain vanilla excel sheets. We are talking of complex programmes that are running in the background, moving trillions of bytes of data before arriving at the solution. In the front it may still look like an instant solution but it will be a rigorous solution arrived at after sifting through mountains of data using high-end algorithms.

Give them robo advisors that use machine learning and AI: That is the huge back-end we are talking about. On the surface it may just look like an innocuous user interface churning out smart solutions. At the back there will be massive data machinery consisting of three facets. Firstly, there will be high-end algorithms that will be running permutations and combinations through various investment options. Secondly, there will be an artificial intelligence platform that will be applying constant inward learning to fine tune your goals into actionable and measurable milestones. Finally, there will the robo advisor that will match the financial goals on one side and the investment basket on the other side to come up with optimal solutions.

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Advice with human touch without the human bias: Anything that is customised has to have a human touch. After all, every person is distinct, their goals are distinct and therefore the solutions must also be distinct and unique. To generate millions of such customised solutions, you need to leverage the power of technology. It is this robo advisory machine that delivers these customised solutions with a human touch. Yes, we are not talking about static templates and age-old wisdom based solutions. We are talking of solutions that are based on real data on the demand side and the supply side. The biggest advantage of these robo advisory solutions is that they are free of human bias and offer solutions that are the optimal answers in the context.

Source: DNA Money