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Robo Advisors and Crowdfunding: Is it Good to Invest in Digital Wealth Managers?

Robo Advisors are eagerly looking towards crowdfunding as the best way for expansion. These digital advisors have started offering the opportunity to directly invest in these platforms to gain ownership.

Although these Robo-advisors are relatively new to the investing landscape, investors are showing confidence in their future fundamentals. This is evident from the latest round of crowdfunding of £10 million from Nutmeg – which is the largest digital manager in the U.K. This digital fund manager has previously successfully raised £ 143 million through crowdfunding.

Nutmeg management believes that they would successfully raise £10 million for their international expansion.

Martin Stead, CEO of Nutmeg, says: “We’re opening up ownership of our business to give eligible customers the opportunity to invest alongside institutional investors, venture capitalists and leading entrepreneurs. We’re investing in new features for our UK customers, while also taking Nutmeg to new markets around the world, with our first international launch imminent.”

Generally, younger and financially unproven companies rely on crowdfunding to expand their business. The lack of proven financial history means that there is a high level of risk for investors.

Nevertheless, the investments from several prominent players such as Taipei Fubon Bank, Convoy, Goldman Sachs and Balderton Capital in Nutmeg are the indication of increasing confidence in robo advisors.

MarketsFlows, another popular digital wealth management platform in the U.K, has secured initial £700,000 funding target after successfully securing more than £450,000 in its previous round.

Robo advisors are gaining popularity among traders amid low fee structure and higher returns. Consequently, these automated platforms have been experiencing significant growth in trading volume, assets under management and registered accounts. According to Deloitte, assets under management of robo advisors could exceed $2.3 trillion levels by 2020 and this figure is likely to reach $16 trillion by 2015.

While the growth figures look significantly attractive, NASAA suggests investors thoroughly investigate to make sure which is platform has better growth prospects.

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Based in Saudi Arabia, Siraj has a strong understanding of and passion for accounting and finance. He has worked for international clients for many years on several projects related to the stock market, equity research and other business, accounting and finance related projects. Siraj is a published financial analyst on the world's leading websites including SeekingAlpha, TheStreet, MSN, and others.