Robo-advisors are platforms that use algorithms to manage users’ investment platforms. And they are threatening to upend the enormous global wealth management industry.
Globally, wealth managers were responsible for $74 trillion in assets under management (AUM) in 2014. BI Intelligence forecasts that robo-advisors will manage around 10% of total global assets under management (AUM) by 2020. This equates to around $8 trillion.
In a new report from BI Intelligence, we look at the market for robo-advisory services, the drivers behind consumer adoption of robo-advising, why the robo-advisor market presents an opportunity to traditional wealth management firms, and how startup robo-
advisors can succeed as massive legacy companies begin offering their own services.
Here are some of the key takeaways:
- Large incumbent wealth managers won’t lose out to startups like Betterment and Wealthfront. Instead, they are embracing the technology and launching their own products, which are scaling quickly.
- Consumers across all asset classes are receptive to robo-advisors — including the wealthy. 49% of this group would consider investing some of their assets using a robo-advisor.
- The majority of assets managed by robo-advisors will come from people who already have some investments. We estimate that the volume of assets that comes from people who don’t currently invest will be less than 1% of the total by 2020.
- Startups are going to find it difficult to scale, and will need to differentiate their products to succeed. They are already doing this by providing white label services to wealth managers, and more customized stand alone solutions.
In full, the report:
- Provides a forecast for the volume of assets robo-advisors will manage by 2020.
- Highlights the factors that will drive the growth of robo-advisors
- Explains the different types of robo-advisor business model.
- Details the outlook for incumbents and startup robo-advisors in the wealth management industry.
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