[Research Report] The robo-advisory market size is expected to grow from US$ 6.88 billion in 2022 to US$ 61.51 billion by 2030; it is estimated to grow at a CAGR of 44.1% from 2022 to 2030.
Analyst Perspective:
The robo-advisory market has witnessed significant growth in recent years, driven by technological advancements and the huge adoption of robo-advisory among various end users such as retail banking, asset management, and others for conducting algorithmic calculations to analyze data and transmit comprehensive information, driving the robo-advisory market growth. In addition, robo-advisors offer various benefits such as tax-loss harvesting, low-cost portfolio, better decision-making, safe and secure investments, and help to eliminate credit risks. These benefits provided by the robo-advisory are anticipated to drive the robo-advisory market growth over the forecast period. The growing technological advancements such as artificial intelligence (AI) and machine learning (ML) are emerging as lucrative growth opportunities for the robo-advisory market growth.
In recent years, robo-advisory has become increasingly popular as more investors opt for low-cost, automated investment options due to their convenience. With just a few clicks, investors can open an account, answer questions about their financial goals and risk tolerance, and start investing. The platform then creates a customized investment portfolio and manages it continuously, rebalancing it as needed to keep it aligned with the client's goals.
Robo-Advisory Market Overview:
In today's fast-paced environment, consumers don't have time to research investments, constantly monitor or analyze the investment markets, and manage their daily portfolios. Such consumers prefer to pay a professional to handle some financial decisions for them but still want to be able to monitor their accounts online 24/7 without having to sit down in person with a traditional advisor. This is where robo-advisors can help.
A robo-advisor is a digital platform providing automated, algorithm-driven financial planning and investment services with minimal human supervision. A robo-advisor asks questions about a company’s financial situation and future goals, uses the data to offer advice, and automatically invests in the company. Nowadays, most robo-advisors use passive indexing strategies optimized using some variant of modern portfolio theory (MPT). Some robo-advisory solution providers offer optimized portfolios for socially responsible investing (SRI), halal investing, or tactical strategies that mimic hedge funds. They also can handle much more sophisticated tasks, such as tax-loss harvesting, investment selection, and retirement planning. Robo-advisors are efficient, help to keep tabs on investments and are a good choice for most long-term investors and tech-forward individuals.
Robo-advisors use various information about an investor to suggest an investment strategy. In many cases, users ask some questions online or through an app about their information and their current financial situation. A robo-advisor then uses this information to suggest an investment strategy for meeting the financial goals. Investment strategies can include a mix of different types of investments, and many robo-advisors include account rebalancing services to help investments stay in line with financial goals and preferences.
Strategic Insights
Robo-Advisory Market Driver:
Increased Demand For Personalized Investment Solutions to Drive Growth of Robo-Advisory Market
Robo-advisors have emerged as an alternative to traditional financial advisors. The viability of robo-advisors crucially depends on their ability to offer personalized financial advice. Investors are increasingly seeking personalized investment solutions. Organizations that can deliver personalized solutions at scale are gaining a competitive advantage in a new era of investment management. Personalized, highly automated investment solutions for the client is becoming more important in recent years. Demand for personalized investment strategies among various end users such as institutional clients, retail investors and others is rising, further driving the robo-advisory market growth. Personalized robo-advisory solution offers tailored content and recommendations based on customer data and preferences. For instance, robo-advisors can send customers personalized emails, newsletters, and notifications with relevant information, tips, and updates on their portfolio performance, market trends, and financial goals. Furthermore, they can also use data analytics and machine learning to suggest suitable products, services, and strategies for their customers based on their risk profile, investment horizon, and financial needs. Thus, increased demand for personalized investment solutions to drive the growth of the robo-advisory market.
Robo-Advisory Market Segmental Analysis:
Based on product type, the robo-advisory market is segmented into Automated Robo-Advisors and Hybrid Robo-Advisors. A hybrid robo-advisor service combines professionally managed accounts with access to financial guidance or planning. For many hybrid robo-advisors, the guidance and planning services are available through phone or video calls with human financial advisors. These services come at a lower cost as it is held over the phone and through computer or app-based video conferencing. Hybrid robo-advisors combine the benefits of both automated investment management and human financial advice. These platforms use technology to manage portfolios based on investors' goals, risk tolerance, and investment preferences while offering human, financial advisors access to more personalized guidance and support.
Furthermore, hybrid robo-advisors provide various benefits such as cost-effectiveness, improved accessibility, personalized investment strategies, enhanced risk management, and continuous monitoring and support. By leveraging technology, hybrid robo-advisors can provide investment management services at a lower cost than traditional financial advisors, making them more accessible to a wider range of investors. Hybrid robo-advisors democratize access to financial advice, enabling investors with smaller portfolios to benefit from professional investment management services. In addition, hybrid robo-advisors can create customized investment strategies tailored to each client's unique financial situation and goals. Moreover, Hybrid robo-advisors offer improved risk management capabilities through the combination of algorithmic analysis and human oversight, resulting in more balanced and resilient investment portfolios. Hybrid robo-advisors provide ongoing portfolio monitoring and support, ensuring clients' investments are optimized and adjusted to changing market conditions. All such factors are anticipated to flourish the segment's growth in the robo-advisory market.
However, hybrid robo-advisory firms must comply with licensing and registration requirements, ensuring they meet the qualifications and standards to provide financial advisory services. In addition, potential risks and limitations include privacy concerns, over-reliance on algorithms, potential for human bias, and difficulty in measuring the added value of human advisors.
Robo-Advisory Market Regional Analysis:
The North American robo-advisory market was valued at US$ XX billion in 2022 and is projected to reach US$ XX billion by 2030; it is expected to grow at a CAGR of XX% during the forecast period. North America holds one of the largest global robo-advisory market shares. High technology adoption trends in the investment industry in the North American region have fueled the growth of the robo-advisory market; for instance, according to research by Accenture, Two-thirds of emerging wealthy and high-net-worth investors in North America favor hybrid financial advisory services over human-only or robo-only services. On the other hand, 54% of investors cited getting very good advice from robo-advisors, and 51% cited trusting their robo-advisor completely. All these factors contribute to the growth of the robo-advisory market in North America.
Moreover, a strong emphasis on research and development in the developed economies of the US and Canada is forcing the North American players to bring technologically advanced robo-advisory services into the market. For instance, in July 2023, Revolut introduced a robo-advisor in the US. This new feature automates the management of investment portfolios on customers' behalf to give a more seamless and cost-effective investing experience compared to traditional companies. In addition, the US has a large number of robo-advisory market players who have been increasingly focusing on developing innovative solutions. Some of the key players in the robo-advisory market are Betterment, the Vanguard Group, Inc., and others. These robo-advisory market players have been witnessing constant demand from investors. All these factors contribute to the US's growth of the robo-advisory market.
Robo-Advisory Market Key Player Analysis:
The robo-advisory market analysis consists of the players such as AXOS INVEST, INC.; BETTERMENT LLC; CHARLES SCHWAB AND CO., INC.; FUTUREADVISOR; HEDGEABLE, INC.; NUTMEG SAVING AND INVESTMENT LIMITED; PERSONAL CAPITAL CORPORATION; SIGFIG WEALTH MANAGEMENT, LLC; THE VANGUARD GROUP, INC.; WEALTHFRONT CORPORATION are among the key robo-advisory market players profiled in the report.
Robo-Advisory Market Recent Developments:
Inorganic and organic strategies such as mergers and acquisitions are highly adopted by companies in the robo-advisory market. A few recent key market developments are listed below:
- In January 2023, M&G Wealth announced the launch of a hybrid robo-advisor. This new platform uses an algorithm to determine each customer's risk appetite, financial knowledge and financial situation; available as an app on Android and iOS and a web application, the platform provides investors with access to a choice of 'classic' and 'targeted' portfolio.
- In March 2022, flatexDEGIRO AG, Europe's largest and fastest-growing online broker for retail investors, announced the signing of a Memorandum of Understanding (MoU) to extend its long-standing B2B partnership with digital wealth manager Whitebox, one of the independent robo-advisors for retail investors. Together, flatexDEGIRO and Whitebox offer a fully digital investment solution to flatexDEGIRO's customers.
- In November 2022, J.P. Morgan Wealth Management announced the launch of its remote advice business, J.P. Morgan Personal Advisors. Under this, Clients can video chat with an advisor and build a financial plan from anywhere.
- In November 2020, JPMorgan Chase announced the launch of the hybrid robo-advisor program, which offers investors a digital investment platform and ongoing access to a human, financial advisor.
- In December 2020, UOB Asset Management partnered to offer a robo-advisory solution to investors in Singapore. The new solution will be customized for individuals by leveraging technology, data analysis and algorithm-based tools.