Recent years have witnessed a surge in the use of robo-advisors as an appealing alternative to conventional investing. These online platforms gained massive popularity among investors, mostly because of their lower saving entry points and cheaper fees.
Although the coronavirus outbreak has affected the market, the global robo-advisors industry is still expected to maintain its growth this year. As one of the main Fintech trends and according to data gathered by InsideBitcoins, the United States, as the leading robo-advisors market globally, is set to reach over $1trn value in 2020, growing by 40% year-on-year. The noticeable rising trend of the US robo-advisors segment is forecast to continue in the following years, with the market value reaching $1.5trn by 2023.
Market Value Enlarged 5.5 Times Since 2017
A typical robo-advisor collects information from clients through an online survey and uses the data to provide automated, algorithm-driven financial planning services with little to no human supervision, improving the user experience dramatically. These investing platforms also offer easy account setup, portfolio management, and customer services. Furthermore, they require small opening balances, from as little as $10 and charge low fees, around 0.25 percent a year.
Recent years have witnessed a rapid growth of the robo-advisors market in the United States, as the first country to introduce the automated financial advisors. In 2017, the total assets under management in the US amounted to $191.6bn, revealed the Statista data. In the next two years, this value jumped almost four times, reaching $757.1bn in 2019.
Statistics show the US robo-advisors segment is set to reach $1.06trn this year, or almost 75% of the global robo-advisors market value. With $700bn less than the US market, China ranked as the second-largest robo-advisors industry in the world. The UK and Germany follow with $24bn and $13bn, respectively.
The average assets per user in the US robo-advisors segment have also increased trough years, growing from $38,817 in 2017 to $99,135 in 2020. By the end of 2021, this amount is expected to touch nearly $103,000.
The Number of Users to Grow 54% Year-on-year and Hit 70,5 Million
As the leading robo-advisors industry, the United States is the base for some of the largest players on the market across the globe, such as are Wealthfront, Betterment, Nutmeg, Personal Capital, The Vanguard Group and the FutureAdvisor.
Over the years, their services have become appealing to investors across the world, causing a surge in the number of users in the robo-advisors segment.
In the last three years, the number of investors using robo-advisor financial planning services all around the world grew by almost 5.5 times, reaching 70.5 million in 2020. Statistics show this number is set to double in the following years, reaching 147 million by 2023.
According to Investopedia, robo-advisors (also spelled robo-adviser or roboadvisor) are digital platforms that provide automated, algorithm-driven financial planning services with little to no human supervision. A typical robo-advisor collects information from clients about their financial situation and future goals through an online survey and then uses the data to offer advice and automatically invest client assets. The best robo-advisors offer easy account setup, robust goal planning, account services, portfolio management, and security features, attentive customer service, comprehensive education, and low fees.
The first robo-advisor, Betterment, launched in 2008 and started taking investor money in 2010, during the height of the Great Recession. Their initial purpose was to rebalance assets within target-date funds as a way for investors to manage passive, buy-and-hold investments through a simple online interface. The technology itself was nothing new. Human wealth managers have been using automated portfolio allocation software since the early 2000s. But until 2008, they were the only ones who could buy the technology, so clients had to employ a financial advisor to benefit from the innovation. Today, most robo-advisors put to use passive indexing strategies that are optimized using some variant of modern portfolio theory (MPT). Some robo-advisors offer optimized portfolios for socially responsible investing (SRI), Hallal investing, or tactical strategies that mimic hedge funds.
The advent of modern robo-advisors has completely changed that narrative by delivering the service straight to consumers. After a decade of development, robo-advisors are now capable of handling much more sophisticated tasks, such as tax-loss harvesting, investment selection, and retirement planning.
Other common designations for robo-advisors include “automated investment advisor,” “automated investment management,” and “digital advice platforms.” They are all referring to the same consumer shift towards using fintech (financial technology) applications for investment management.