Investing through online platforms, known as robo-advisors, has become popular over recent years, largely because of their cheaper fees and lower saving entry points compared to conventional alternatives and stock brokers.
Although the global economic slowdown has affected this market, this sector is still forecast for significant growth over the coming years, according to data gathered by LearnBonds.com. Robo-advisors are forecast to become $1.4trn worth industry this year, jumping by 47% year-on-year. By 2023, assets managed by robo-advisors are expected to jump to $2.5trn in value.
Greater Returns for Investors
The robo-advisory market grew out of the 2008 financial crisis as small investors looked for wealth managers who charged lower fees, at a time of historic low interest rates on savings.
US startups Betterment and Wealthfront were among the first to step into this gap a decade ago. They offer algorithm-driven financial planning services with little to no human supervision.
A typical robo-advisor collects financial information from clients through an online survey and uses the data to offer advice and automatically invest. They usually charge low fees, around 0.25 per cent a year, and require small opening balances, from as little as $10. Traditional wealth advisors charge investors around 3 per cent a year, take a further percentage off profitable investments, and require a deposit of hundreds of dollars.
Over the last ten years, robo-advisors have grown across the US and Europe. In 2017, assets under management in the robo-advisors segment amounted to $240bn, revealed the Statista Robo-advisors Market Outlook. Over the next two years, the market volume quadrupled and jumped to $980.5bn value.
Despite such a significant rise over the last couple of years, the industry is still expected to grow at a compound annual growth rate of 21% by 2023.
The Number of Users to Triple and Hit 147 Million by 2023
Critics say the lack of personal support to clients and limitations on more complex investment products are a mark against robo-advisors.
However, tech-savvy investors have been drawn to this market. In 2017, there were 13.1 million users with assets managed by robo-advisors. This number has jumped five times to 70.5 million this year, demonstrating 54% year-on-year growth.
The statistics indicate that the number of investors using robo-advisor financial planning services will hit 147 million by 2023, eleven times more than the 2017 figures.
The US Hold 75% of Global Robo-advisory Market
The US was the first country to introduce the automated financial advisors, and represent the leading robo-advisory industry in the world. Some of the largest players on the market across the globe are Betterment, Wealthfront, Personal Capital, Nutmeg, FutureAdvisor, and The Vanguard Group.
The entire US robo-advisory industry is expected to hit a $1trn value this year, with hybrid robo-advisors as the largest and the fastest-growing segment.
Hybrid robo-advisors offer an automated investment and trading platform with access to expert human advice from financial advisors. This new trend grew out of customer`s demand for a more tailored solution for the complex investments such as stocks, bonds and bitcoin.
With $700bn less than the US market, China ranked as the second-largest robo-advisory industry in the world. The UK is forecast to hit $24bn market value this year, while Germany ranked in fourth place with $13bn worth assets in the robo-advisors segment. Canada is the fifth-largest robo-advisory market in the world expected to reach $8bn value this year.