Everyday people are investing without making lines or calls. Unlike other clients, a robot advises these new investors
In the XXI century, the financial world is still complicated, risky, and expensive. To invest, people needs to know financial concepts and facts challenging even for experts. In part, it is because investment opportunities are diverse, investments must be monitored, and the investment market is changing. Additionally, the costs of financial advisory services end up excluding us.
Automated financial advisory technologies - also known as financial advisory robots - use financial algorithms (not people) to recommend efficiently cost to all types of users, simple investment instruments such as fixed and variable income assets, collective investment funds, and extend financial inclusion to the common people. They work day and night here in Colombia and they do it through regulated and authorized entities. Understanding how advisory robots work and what benefits they bring to everyday people is the right step towards improving our personal finances.
The eternal question is to decide how and in what to invest
Forming an optimal investment portfolio is not easy. In the Colombian capital market, there are more than 200 options and the problem is precisely to build a profitable portfolio. The financial advisory robots facilitate decision-making by designing an investment portfolio for beginners who, although they tell us it is personalized, is standard and pre-established. This is why the terms "robot" and "automated" are used. Even so, it is not at all a lower portfolio.
Among the benefits, that this technology confers on those of us who know little about the stock market, is financial inclusion. According to the World Bank, financial participation also grants access to other services such as credit, savings, education, and insurance. The other direct benefit is that this technology increases our financial culture. Once we enter the financial word, we will be interested in understanding how the robot handles our resources and what changes in products should matter to us.
Regarding the personal advice or the profitability of the advised investments, it is pertinent to note that the recommendations of the robot are not qualitatively superior, nor will they replace the employees, or that the profitability will be better. Think rather that they are different but complementary consultancies, both in their market scope and in what they contribute to each type of investor.
In Colombia, the first robot to arrive was "Nico" from Multibanca Colpatria. Then, it arrived "Sofía" in Falabella. Although they do not focus on finance, these robots facilitate the entry and use of banking services. For its part, Valores Bancolombia presented "InvesBot", which can recommend investment portfolios for beginners, and the interesting thing is that it creates diversified portfolios of assets and combines it with goals and risks that we establish. Although there are still no official data on the effectiveness of their decisions, this robot reduces the difficulty to start our first investment.
Are they legal in Colombia?
Colombian regulators allow the consulting robots. However, the entities must ensure compliance with the standards already required for traditional financial advice. It is important that you know that there is an obligation for financial advice to be provided through authorized persons and registered in the National Registry of Professionals Stock Market. Nevertheless, the consulting robots are not yet subject to the same conditions. Entities must transparently expose the implications of financial automation and demonstrate the effectiveness of their robots so that clients can base their judgments and decisions.
It is beneficial that we associate technology with purposes beyond mass consumption and excessive entertainment. Such is the case of personal finances and savings. However, the trick is in the details: although robots and automated consulting technology contribute to the inclusion and growth of financial culture, by expanding the availability of services and facilitating the creation of investments - to the point that any person without prior knowledge or great resources can start- they are not infallible.
Keep in mind that although a sophisticated algorithm has shaped the investment portfolio, nothing changes the behavior of assets or the market. Neither the robot nor the advisory technology can influence the liquidity and market risks of the assets. What they do is to monitor the markets while we sleep to effectively warn us about the changes in the income of the instruments and recommend adaptations to the portfolio in search of the financial possibilities of our resources. In the monitoring intelligence and the precision of the recommendations lies the success of this technology and the tranquility of our profits.
Latin American Post | Harry Wong
Translated from “ No es ficción: Los colombianos podemos invertir asesorados por robots financieros”