Blockchain 1.0 – How Bitcoin works

Blockchain revolution is broken down into three categories: Blockchain 1.0, 2.0, and 3.0.

  • Blockchain 1.0 is currency, the deployment of cryptocurrencies in applications related to cash, such as money transfer, remittance, and digital payment systems.
  • Blockchain 2.0 Contracted, the entire slate of economic, market, and financial applications using the blockchain that are more extensive than simple cash transactions: stocks, bonds, futures, loans, mortgages, titles, smart property, and smart contracts.
  • Blockchain 3.0 is blockchain applications beyond currency, finance, and markets—particularly in the areas of government, health, science, literacy, culture, and art.



  • Bitcoin is digital cash. It is a digital currency and online payment system in which encryption techniques are used to regulate the generation of units of currency and verify the transfer of funds, operating independently of a central bank.
  • Bitcoin is pseudonymous (not anonymous) in the sense that public key addresses (27–32 alphanumeric character strings; similar in function to an email address) are used to send and receive Bitcoins and record transactions, as opposed to personally identifying information.
  • Bitcoins are created as a reward for computational processing work, known as mining, in which users offer their computing power to verify and record payments into the public ledger. Individuals or companies engage in mining in exchange for transaction fees and newly created Bitcoins. Besides mining, Bitcoins can, like any currency, be obtained in exchange for fiat money, products, and services. Users can send and receive Bitcoins electronically for an optional transaction fee using wallet software on a personal computer, mobile device, or web application
  • Bitcoin: A Peer-to-Peer Electronic Cash System

Bitcoin Landscape


How Bitcoin Works

Suppose Alice wants to buy a coffee in Bob’s café, and her friend Bob wants to send money to bob’s café who accepts money into Bitcoin

The payment requests QR code

encodes the following URL, defined in BIP0021:

  • bitcoin:1GdK9UzpHBzqzX2A9JFP3Di4weBwqgmoQA?
  • amount=0.015&
  • label=Bob%27s%20Cafe&
  • message=Purchase%20at%20Bob%27s%20Cafe
  • The bitcoin network can transact in fractional values, e.g., from millibitcoins (1/1000th of a bitcoin) down to 1/100,000,000th of a bitcoin, which is known as a Satoshi,
  • In simple terms, a transaction tells the network that the owner of some bitcoins has authorized the transfer of some of those bitcoins to another owner. The new owner can now spend these bitcoins by creating another transaction that allows to transfer to another owner, and so on, in a chain of ownership.

Bitcoin Transactions

Transactions move value from transaction inputs to transaction outputs.An input is where the coin value is coming from, usually a previous transaction’s output. A transaction output assigns a new owner to the value by associating it with a key. The  destination key is called an encumbrance.

Constructing a Bitcoin Transaction 

  • Step 1 – Alice’s wallet application contains all the logic for selecting appropriate inputs and outputs to build a transaction to Alice’s specification, Alice only needs to specify a destination and an amount and the rest happens in the wallet application without her seeing the details
  • Step 2 –If the wallet application does not maintain a copy of unspent transaction outputs, it can query the bitcoin network to retrieve this information, using a variety of APIs available by different providers or by asking a full-index node using the bitcoin JSON RPC APIPictur2e1.png 
  • Getting the Bitcoin Wallet balance in sync with the network.
    • Step 3 – With this information, Alice’s wallet application can construct a transaction to transfer that value to new owner addresses.


  • Creating the output
    • Step 4 – In simpler terms, Alice’s transaction output will contain a script that says something like, “This output is payable to whoever can present a signature from the key corresponding to Bob’s public address.”


  • Getting the balances back in Alice wallet
    • Step 5 – This transaction will also include a second output, because Alice’s funds are in the form of a 0.10 BTC output, too much money for the 0.015 BTC cup of coffee. Alice will need 0.085 BTC in change. Alice’s change payment is created by Alice’s wallet in the very same transaction as the payment to Bob


  • Adding the transaction fees
    • Step 6 for the transaction to be processed by the network in a timely fashion, Alice’s wallet application will add a small fee. Alice creates only 0.0845 as the second output, there will be 0.0005 BTC left over. The resulting difference is the transaction fee that is collected by the miner as a fee for including the transaction in a block and putting it on the blockchain ledger


Adding the Transaction to the Ledger

  • The transaction created by Alice’s wallet application is 258 bytes long and contains everything necessary to confirm ownership of the funds and assign new owners. Now, the transaction must be transmitted to the bitcoin network where it will become part of the distributed ledger (the blockchain).
  • If Bob’s bitcoin wallet application is directly connected to Alice’s wallet application, Bob’s wallet application might be the first node to receive the transaction. However, even if Alice’s wallet sends the transaction through other nodes, it will reach Bob’s wallet within a few seconds. Bob’s wallet will immediately identify Alice’s transaction as an incoming payment because it contains outputs redeemable by Bob’s keys. Bob’s wallet application can also independently verify that the transaction is well formed, uses previously unspent inputs, and contains sufficient transaction fees to be included in the next block.


Reference – Minimum Viable Blockchain


Abhinav Gupta

Next Topic – Bitcoin Mining for Dummies



Minimum Viable Business Analyst

That intersection is what is called the Minimum Viable Business Analyst (MVBA), and it defines a set of skills or knowledge that are useful to be an effective generalist business analyst, one who can work on almost any project

The above diagram is simple; the intersection of these skills is what makes a business analyst the most successful business analysts in today’s organization. When I started my career more than a decade back I thought I would structure my learning in every area of the diagram, but what I did not know was which area to focus. Initially, I tried learning everything, but then I realized there is so much to learn and there is not much time I have to master all the areas.

Any project that I did was completely different from what I did the last time. This could be due to any one or more reasons that the current project and the previous project is in the different domain, with the different set of stakeholders, Budget & Time constraints, Quality requirements and User requirements etc. The whole idea of being a business analyst is to create a new solution that business/user wanted.

In order to explain the MVBA and why the industry needs generalist or the intersection of the skills in BA as highlighted in the above diagram, I would try to explain in simple language.

Being a Domain Specialist

As a BA, the most important part is you should understand the language the customer is speaking in order to take down the requirement. One needs to understand the core business case why the user wants his product, what is his current set of problems and what is it trying to achieve at the end of the project. Having domain knowledge helps communicating both verbally or in writing easier for the BA and this is one of the most important skills which makes the BA a thousand times more effective as it helps to articulate what the client wants and also spell out the challenges he might have in the solution that he already has it in his mind. How many times the clients comes up with a pre-proposed solution and says “This is all I want…” an effective BA would help him see through the cracks of his solution and identify the leaks and give then a solution that avoids the leaks.

The fastest way to learn — Quick Googling of those terms will teach you some of the important concepts that would help you to understand the benefits and challenges in the current business process. Doing a quick comparative study of the competitors would help you to create a USP for your customer. Knowing domain in more details would help you to solve the problem in a different way and also how different business functions and layers of business talk to each other.

Being a UI/UX Expert

The UI/UX skill is in growing demand for a BA these days and having the UI/UX knowledge with the BA would make a winning combination. This is a primary job of the developer, so ask a UI/UX guy to do it but when he/she comes up with the design; ask them to walk you through each component one by one and explain to you what the system does. Now, what makes you a better business analyst is to ensure that the user experience is aligned to what would help the user to do his business in an easier way. Another thing is to ensure the system does not have complex UI, the design should be consistent and suite the technical as well as business requirements.

BA with UI/UX knowledge is a winning combination for a modern enterprise, as the solution must be found quickly to avoid costly delays in the project.


Imagine that you are in middle of a requirement elicitation workshop with the clients and it is getting difficult for the client to imagine the solution that you are proposing, Business Analyst may create wireframes the developer uses to produce the screens, and the developer may be responsible for decisions such as when to use a button vs. a link, or radio buttons vs. a drop-down menu to provide options to users. This would help to get the approvals from the client quickly and also give clients a sense of the look and feel of what the solution might be

The fastest way to learn– Talk to your developer/designer they would know the design patterns that they use. Trying out hands on some applications like Balsamiq to give the first-hand information to the designer. Participate in JAD sessions with the user, designer and the technical architects which help in understanding the UI/UX design decisions they would have taken in the past and also introduce you to the style guides and the UI libraries.

Being a Project manager

Until few years back the BA and PM were considered to be two separate skill sets, which is true today but a lot of the organizations these days have started having roles such as BA/PM. Being a PM is boring (No offense to all the Project managers) but most importantly you can’t run a project without a Project manager

Project management skills are the cement that binds everything, and learning this skill is a hard one, to be an effective project manager takes a lot of time and experience. You can read up all you want, but at the end of the day, it’s a human behavior problem. There are no shortcuts to enhance your interpersonal skills, communication skills and I think it only comes with time and experience and with dealing with people

An Effective Business Analyst needs to be a “PEOPLE PERSON” rather than a “PROCESS PERSON” in today’s agile environment

The fastest way to learn — in order to accelerate the learning process is to talk to people, understand the common problems encountered by your team and other project teams and how those problems were solved. Going thru the lesson learned documents of old projects there is a learning value to their philosophies behind their approaches.

Being a Tester

Testing is a specialized discipline, regardless of the size of the project there would always be a testing phase in that project and the success of the project depends on does the system is made as per the laid requirements. Unfortunately, the Business analyst does not give a lot of importance to testing. As a BA, you need to ensure that the product is built right which meets all the client requirements (even if that seems impossible).

As a BA need to be involved in testing and the focus should be on “breaking the product or the output” the testers are usually attempting to identify the faults in the product based on the document that the Business analyst wrote. It is almost inevitable that BA can document everything; there are always some unsaid requirements. It is not a tester’s domain to question whether it is a significant fault in terms of the overall outcome of the project. Resolving the fault with some workaround is not a tester job. Doing testing or User acceptance testing (UAT) is very important for a business analyst as all aspects of the analysis function may need to be quality-assured.

The fastest way to learn — The best way of learning how to test effectively is to Jump in the water and start swimming!! You can also read more about the testing methods on the internet or by grabbing the testing books.


WARNING!! Should not be a rabbit hole !! for a BA and you should know when to stop digging. One should also remember that there should be no conflict of interest with the Testing team as for a successful project delivery an Independent verification and validation is almost a must.

The whole concept of having a generalist or an MVBA (minimum viable business analyst) in today’s scenario varies from organization to organization, I think the intersection of the 4 skills is what is required to reduce the time of shipping of the project and delivering the value to the stakeholders in the most cost-effective manner with great quality.

Hope that this might have helped you in your quest to learn more and be a better and successful Business Analyst helping the organizations and their customers achieve their goals

Happy Reading!!

Abhinav Gupta @abhi13aug

Also at

Future of Wealth management Platforms

The Customers don’t care about the platforms; all they care about is the services, experience and the reliability of the platform. 

Wealth management firms can no more compete on price, they are moving towards the value of outcome

Based on the key drivers of the wealth management business, below is the proposed business architecture for the wealth management firms in order to maintain the competitive advantage.

Forward thinking firms are combining both the client facing and back office technology to support multiple client and advisor segments


Making the customer experience and applying technology to improve it across various platforms would drive the long-term loyalty of the customer. The consistent customer experience across the various line of business is the key driver.

Wealth management firms struggle with silos of each product offering, as there is no integration with the front office to the back office application, making it difficult to maintain consistency – IBOR & PBOR solution would help them cover come the current problem

Apart from the customer wealth management advisory firms also needs real-time information and new ways of advisory life-cycle management, which would play an important role in getting more business and as the business grows, need to more sophisticated platform grows.

As the retail wealth management advisory models evolve to reflect increasing needs of the clients they bring more value added services to the clients, the firms at the same time need to keep a tap on the price of the wealth management platforms.

Today the clients are better informed and more technically capable than ever before, with the advances in consumer technology and the 24/7 news cycle enable seamless and almost limitless access to markets information to the clients makes it more and more difficult for the traditional wealth management advisory firms

Deepdive – Wealth Management Ecosystem

There are various business models that operate in retail wealth management, some firms offer a specific business model whereas other firms operate on multiple business models giving the customers the flexibility to choose the business model that suits best to their needs.

No model is likely to dominate the global wealth management because they are designed around different target customers

Primarily there are three main types of business models – Universal banks, Platform players and Private Banks and Brokerages. Various Broker affiliated advisors, RIA (Fee-based business), Hybrid and Dual registration, Robo Advisors etc. use full-service firms, Banks, Independent broker-dealers, Self-directing firms, self-clearing firms, discount brokerages, global financial firms etc. some of these business models are explained in details below.

The Business models differ from country to country and the challenges of different business models are similar. It is a difference in the regulatory regimes of the country. The customization of their services for the national markets and selection of products based on the maturity of the maturity of markets


Key Players

Traditionally, the industry was dominated by private banks and stockbrokers. But there were important regional differences in the dominant types of player. To some extent, this reflected differences in the structure and regulation of the financial services industry as a whole. Broadly, there are two main models:

  • North American model, where the industry is dominated by full-service and discount brokerages and money managers, whose strengths lie in the investment area, rather than in traditional deposit gathering, as noted above, the traditional emphasis here is on a (transaction driven) commission-based business model.
  • The European model, where universal and traditional private banks dominate, due to their ability to offer a comprehensive range of wealth management products and services. The emphasis here is on a fee-based business model.




Registered Investment Advisors (RIA)

These investment advisors (IA) are registered with SEC under the Investment adviser’s act of 1940 in the USA. An IA must adhere to a fiduciary standard of care laid out in the US Investment Advisers Act of 1940. This standard requires IAs to act and serve a client’s best interests with the intent to eliminate, or at least to expose, all potential conflicts of interest which might incline an investment adviser—consciously or unconsciously—to render advice which was not in the best interest of the IA’s clients . It is one of the fastest-growing sectors, benefiting from advisor and asset migration away from wirehouses. Strong client relationships, supported by product and operational support from large-scale platform providers.

The vast majority of broker-dealer firms serving retail clients also operate a separate RIA firm, which we refer to as a corporate RIA. The assets managed by corporate RIAs are not included in the independent RIA subsegment; rather, assets managed under a corporate RIA structure are rolled up under each broker-dealer firm’s subsegment. Representative firms in the independent RIA subsegment include Oxford Financial Group, Shepherd Kaplan, and Appleton Partners.

 Digital advisors/Robo-Advisors

Over recent years, a number of web-based advisors have emerged. They offer above-average advisory quality and act as a gateway to third-party product providers. They are Innovative providers leveraging technology, social media, and communities to attract younger and self-directed investors Data aggregation is a key value proposition of this new breed of Financial Advisors.

Family offices

They serve the very wealthiest clients, acting as an integrated hub for the family’s financial administration. They perform, essentially, three main functions:

  • Specialist advise and planning (including financial, tax, strategic and philanthropic);
  • Investment management (including asset allocation, risk management, investment due diligence and analysis, discretionary asset management and trading); and
  • Administration (including coordination of relationships with financial services providers and consolidated financial reporting).

A family office may be dedicated either to a single family or serve a small number of families. Some of the major private banks, such as Pictet and JP Morgan, have developed their own multifamily offices, but the vast majority are independent specialists (and have, in some instances, evolved from single family offices). Family offices are particularly well-developed in the US and are starting to evolve in Europe

Private Banks

 Is a broad category of players that includes the classic Swiss private banking partnership, mainly targeting HNWIs, these institutions offer clients end-to-end capabilities via a relationship with a senior banker (the relationship manager) that is confidential and founded on trust.

Retail and universal banks

They target affluent clients who need comprehensive advice and who value a close banking relationship and the emphasis is on ‘farming’ their existing customer base, including business banking clients. Examples include Citigroup, HSBC, Bank of America.

Trust banks

Are essentially the US equivalent of the traditional European private bank. Most have their roots in providing trust and custody services but have broadened their product range over the years. They now also provide asset management, insurance and financial, tax and estate planning. Their core target client segment is UHNWIs, but many have also developed tailored propositions for HNWIs

Stockbrokers and Wirehouses

Target self-directed investors and traders for their day-to-day transaction execution and investment needs, they offer low-cost access to a range of investment products as well as to extensive investment research. But they are not exclusively dedicated to affluent clients, do not typically offer much in the way of customized advice and often lack transaction banking products. It is a diverse group, including firms that have their roots in online discount brokering such as E*TRADE, as well as full-service brokers such as Morgan Stanley.

Product specialists

Include hedge funds, private equity funds, mutual funds and structured product providers. Lacking their own captive distribution channels, they manufacture products for distribution across a range of HNW channels, including private banks and financial advisors

Self-clearing retail brokerage (non-Wirehouses)

It refers to a group of large to mid-size national and regional broker-dealer firms (excluding the aforementioned Wirehouses) those clear securities transactions for themselves. Representative firms in this sub-segment include Edward Jones, Ameriprise, RBC Wealth Management, and Raymond James.

Fully disclosed retail brokerage

This refers to all broker-dealer firms that utilize another broker-dealer to clear securities transactions on their behalf (with the exception of some fully disclosed discount and online brokers, which are included in the discount and online brokerage subsegment). Fully disclosed broker-dealers are also referred to as introducing broker-dealer firms. Sample firms in this subsegment include Commonwealth Financial Network, First Allied Securities, and NFP Securities.

Discount and online brokerage

This subsegment refers to broker-dealer firms that cater to self-directed investors by offering low-cost securities execution. The majority of firms in this subsegment engage with clients via a Website. Representative firms in this segment include divisions of Fidelity, Charles Schwab, and TD Ameritrade.

Investor Categorization

Wealth management clients are changing and they are growing in number and in complexity and based on the global financial assets they have been categorized as HNW/UHNW, Mass affluent and Retail customer.  In order to categorize the customer net worth, the assets like cash and deposit, equity and bonds, mutual funds, alternative investments and IRA are considered. Some of the assets like the residential real estate, occupational pension assets and household debt are not considered.




Who Killed the kingfisher..

 Everybody, most of my learned friends want Vijay Mallya arrested. They say he had fun at the cost of Public Money, he should be punished. They say he is a fraud, he lives a rich  and Luxurious life, while not paying salaries to his staff and not paying his lenders and vendors.

Who killed King Fisher Airlines? Have you given a thought? As a citizen of India you should know. As an entrepreneur you should definitely know this. I am sharing below a sequence of media reports from the days of the fall of KingFisher Airlines began. I hope to construct the sequence right, so that you can understand how it was killed. and by whom.. A little, backdrop would be, if you recall, or perhaps can google to verify my statement, Most Airlines across the world were doing bad those days. Many were in the verge of collapse.

You may note Jet Airways stocks had plunged around the same time in Jan 2012..


You May notice, Kingfisher was doing better than Jet Airways.


Kingfisher  desperately had to infuse funds and this was the best thing Vijay Mallya and his team could have done.

It was very well placed,

But what went wrong?

It appeared to be a done deal,

what went wrong?

Not just me, everybody seem to think / say so.. then..

It was obviously not similar thoughts towards Jet Airways.. then.. what went wrong?

Same SBI had hopes on Kingfisher Airlines..


This is the beginning..

Government agency thinks contrary to Market and Banks… why?

Kingfisher Airlines team does, what any serious enterprise does..


Why is Kingfisher targeted, while all Indian Airlines were in similar situation then?


Why stop an Airlines from flying?

How will an enterprise pay salaries, when agency meant to support the player is keeping it away from raising funds..

Does this help you understand better, what happened?

Its important to understand the share holder details of Jet, particularly, foriegn and Indian Share holders.

Please note Naresh Goyal is not an Indian National.

Note the percentage of General Public & Foriegn promoters as share holders in Kingfisher

Note the general public in Jet Airways and also  foreign promoters

Etihad was still interested in Kingfisher and not Jet Airways..


Kingfisher tried things Legally, but what was at play??

Why every possible government machinery tried to scutle Kingfisher Airlines?

Is this the final nail..??

Etihad comes around and agrees to go with Jet Airways..

Anad Sharma was the Commerce Minister..

Then met Finance Minister..

Why, all this to help a company held by majority of  foreign promoters?

Why was Indian Government stretching to do this for Jet Airways, while Squeezing Kingfisher Airlines?

This was perhaps the last nail but we know, what else is happening with the (Once) King of Good times..

Who killed Kingfisher Airlines? Who got Vijay Malaya to this state? Who were the beneficiaries? Can an Indian Entrepreneur dare to do things in his own Country again? Will Indian government support her/him, or lead to what happened to Kingfisher Airlines and Vijay Mallya?

I have never had Kingfisher Airlines or any of Vijay Mallya’s company shares. I have neither been his Associate nor employee. I am writing this to share with my learned friends, this is the truth I saw. I feel bad for Kingfisher Airlines and Vijay Mallya as an entrepreneur. I don’t want such a thing to happen to any entrepreneur.

Product Management Myths and Reality

What has changed, over the years, in the technology industry; which required a role of a product manager?

I did not hear the designation of a product manager 10 years back, there were business analysts, project managers but not the product manager. There is an argument, that somehow end-user needs got detached from the technology-driven product. The product manager enables a company to rapidly deliver products to market since it skims and skips lengthy traditional market research, and consequently bases product design decisions on internal company expertise. Probably yes the business has been changing so rapidly which required this as a specialized role.

So who is a product manager? A business analyst, UI/UX expert, Technology expert, Project manager, Sales associate, Network specialist?

I think the answer is none of them, the commonly used a vague definition of product management misleads and allows many people to place their own personal interpretation on the role of product management, and this is leading to a multitude of diverse definitions in the technology industry. As a product manager, you need to be the like the conductor of the orchestra. You may not know which API’s to call, which would be better to have a server hosted application or a cloud platform, does the customer care about all that?  The Product manager should be as a voice of the customer and should be ready to take tough calls, he should be creative and clear in his ideas and politically correct to get it implemented, should be listening to thought but at the same time should the person who would call the shots.

Does the definition of the role of a product manager in my company same everywhere?

Every company is different and handles product management differently – meaning that the product management discipline is not standardized as much as it could be across the high-tech industry. Further complicating the situation is that in each company there are individual stakeholders who often view and interpret product management very differently from each other. Based on my conversation with various product managers working in different companies, some say that they have been recurrently successful as product manager while others said that they have been just lucky till now, but now they are working on having a consistent understanding of the product management in the organization.

What do you understand by Product manager as the CEO, of the product?

This statement is been used quite often in various blogs, talk’s and books. The product management comprises of all the activities that are responsible for the product to be successful in the market. For example, providing incorrect market requirements, erroneous pricing, or an inaccurate profiling of the target market can all be detrimental and critical. If just one of these aspects of product management is a miss, then the product’s chances of success are greatly diminished and who shall hold responsibility for the failure of the product; The Product manager! And it’s his responsibility to fix it.

How important is the role of a product manager in making a product successful?

Some products are successful because of external factors, timing, or merely good fortune. Not all successful products have had great product management behind them, but it is clear that many product failures have had poor or no guidance from product management. Numerous cases where companies like Google, Apple, JP Morgan’s and Microsoft failed and the most decorated product managers were needed to step down whether it was Apple map or google phone.

 Is it necessary for the product manager to be an Agile/Lean/RAD/waterfall expert?

Well, there is no right or a wrong model for a project, there are instances where the agile model may lead to budget overruns due to continuous change in product requirement, despite having the most amazing product the time to market the product led to product failure. I think everything works, even tossing a coin before choosing the model of development might work for you, but you need to make it work for you.

To conclude, I think there is an increasing need for standardizing the product management as a discipline, and every dollar that a company earns through product development some portion of that dollar they should reinvest in improving the area of product management. Efficient product management practices within the organization increase product managers on job productivity and improve a product’s chances of commercial success.


Robo-Advisory vs. Human Advisors

A simple question

If you had a problem or a goal in mind, would you want a series of checkboxes, questions, telephone prompts or a real person to assist you?

The automated response system may include perhaps a dozen issues and solutions, based on algorithms, which are supposed to meet the needs of most people. A real person can give you real-time responses, specific to your questions when asked with accurate answers.

The financial advising industry has been buzzing about the emergence of Robo-advisors for the past few years as web-based advising companies, with the new technology stack most of these companies like the Vanguard’s, Wealth-front,, etc. have either acquired or developed Robo advisory platforms, spending millions of dollars. These online tools attempt to create and manage a client’s portfolio in a fast and inexpensive way.

Why and How Robo-advisors came into existence?

Historically the problem with trying to get an FIA was many have minimum asset requirements of $500,000 or larger and it is not uncommon for FIAs to charge 1-2% annually (or greater via the loaded investment tools like Mutual funds entry and exit loads). That is 1-2% you have to do better than the market just to keep up.

On the other hand, Robo-advisors manage portfolios automatically, with their decisions driven by the algorithm. Most Robo-advisors include portfolio rebalancing. One, Fidelity’s, would do the tax harvesting and reallocation for you for a 0.5 percent annual fee.

How Robo-advisors do it differently.

Let me try an explain using a simple example

When you do to buy a pair of denim, you essentially speak to the sales guy and just mention the waist size and the fit. They give you an option of 5 types of denim from different companies, but the ultimate decision is yours that which one you want to buy; this is similar to human FIA.

On the other hand you entered a showroom and based on your physical appearance and your choice the computer takes out the best denim suitable for you, now that is Robo advisory. The Robo-advisory work on a concept of “One Size that fits most of the people”

The computer is learning every time based on the historical data, assets performance, your choices and choices made by other individuals having similar risk appetite. The Robo-advisor changes the asset allocation automatically, where the investor does not have to make the asset allocation decision every time all that at very low fees compared to the human FIA.

Typically, these types of accounts can be compared with the Managed accounts that FIA manages wherein the FIA gets an amount from the investor, and the FIA takes the decision based on the market dynamics, the investment decision or asset allocation are completely based on the FIA experience. FIA may charge the end customers a standard fee 1-2% and a percentage of net profit of the portfolio.

Does Robo-advisor suit you and your dad both?

Firms like focus on the end-goal and is ideal for individuals who do not care or want to learn about the details of investing. For these people, the 35 basis points (or less) they pay is well worth the fee, and in many cases much better than hiring an FIA — both regarding cost and sound financial advice.

In my case, most of my assets are “Do it yourself” (DIY), but I’ve also been studying this for years and feel comfortable buying insurance, mutual funds and stocks myself. On the other hand, my dad may not log-in to his online account and would call up his FIA and get his insurance done.

Most of the Robo advisory platforms work on the Modern Portfolio Theory and the tools robot-advisors offer aren’t new, however. Traditional financial advisors had the same tools available to them for years and could roll up a personalized asset allocation plan unique to you.

How to choose a Robo-advisor for yourself or family, what things you need to consider?

Below are some of the parameters that you should consider while choosing a Robo-advisor and compare it with the Human FIA

  • Minimum Deposit – Some firms you can start out with nothing and others require sizable amounts to start with.
  • Annual Fees – Be aware of hidden costs, portfolio management fees, mutual fund entry/exit loads, ULIP management fees etc.
  • Asset Allocation – Does it offer all different products like Insurance, Mutual funds, Stocks etc.
  • Account Type Support – 100% automated vs human assisted advice
  • Tax Optimization – Does it give services like Tax-Loss Harvesting, Tax planning, Tax reclaims etc.
  • Retirement planning only or supports other short term goal based planning
  • Managed by you in which they give trading advice, or directly by the firm
  • Manage all your assets or just a portion

Although there are a few obvious perks/benefits of the Robo-advisor model, there are undeniable advantages that human, financial advisors bring to their clients. The Gen X may feel comfortable using an online tool to manage their money; however, when it comes to taking major decisions involving larger some of money and longer commitments they like to ripe for a face-to-face financial advisor.

I think, looking at the current capital markets and availability of Robo/RIA tools, and the individual investors the hybrid approach is would be appropriate where the Robo-advisors take over the day to day portfolio’s asset allocations, and the humans take up when building a new wealth management portfolio for an investor.


Abhinav Gupta

Certified Financial Planner (CFP)

Original Article (PDF)


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