Robo Advisory Market Report
Robo Advisory Market by Business Model (Pure Robo Advisor and Hybrid Robo Advisor), End-use (Retail, Afﬂuent, HNI, and UHNI), and Regional Analysis (North America, Europe, Asia-Pacific, and LAMEA): Global Opportunity Analysis and Industry Forecast, 2021–2028
Robo Advisory Market Analysis
The global robo advisory market is anticipated to garner $59,344.5 million in the 2021–2028 timeframe, growing from $4,600.0 million in 2020, at a healthy CAGR 39.9%.
The robo advisory market is expected to grow due to product advancements, acquisitions, and business expansion by key market players and also the increasing adoption of the robo advisory for the easy use of financial services.
However, the main impediment is even with a high level of digital interaction, clients frequently feel best-served by human advisors in uncertain market circumstances. As preference of the users is towards the traditional advisor is still on rise, users frequently feel best-served by human advisors in uncertain market circumstances.
According to the regional analysis of the market, the Asia-Pacific Robo advisory market is anticipated to grow at a CAGR of 41.7%, by generating a revenue of $19,518.4 million during the review period.
Robo Advisory Overview
Silicon Valley's financial technology boom has enabled companies to launch robo-advisors. In the financial industry, a robo-advisor is a type of digital financial advisor that manages investments and also offers financial advice with minimal human involvement. Using digital technologies, robot advisors provide digital advice based on input from investors. Based on algorithmic calculations, robot advisors analyze client data such as their financial condition and provide comprehensive asset allocation solutions that meet their future financial goals. Rapid automation of processes and businesses across end-user industries is a major driver of robo-advisory service adoption. These services eliminate the need for human labor because online platforms provide the same services at a fraction of the cost.
COVID-19 Impact on Robo Advisory Market
The COVID-19 pandemic has demonstrated to investors the importance of online services for investment purposes. Clients who previously preferred to speak with a humanoid advisor and even now prefer to visit a bank branch are gradually changing their behavior. This is due to the fact that banks closed their divisions when governments voted for a lockdown. Often, consumers did not expect such a radical move and thus were spending more time on alternative services, which can offer an adequate client experience. The impact of the covid on the robo advisory market is positive. Global concerns have grown since the outburst of COVID-19, which, combined with the constant oil-price war, have shook investors around worldwide. Backend benchmarking, which tracks performance by opening portfolios at leading robo-advisors, found that most digital advisor-managed portfolios performed similarly during market swings. As the coronavirus forces more and more advisers into lockdown mode, the number of users on an online wealth management platform or robo advisory in wealth management has doubled. From wealth management companies’ viewpoints, advisors are spending time managerial clients that have been affected by coronavirus impacts – both personally and economically. For robo-advisors, communication will be slightly different than traditional advisory firms. They will need to lean on digital collaboration tools at their disposal through email, push notifications, and in-app notifications. Innovative tools, such as chat functionality or video conference to connect with a team of advisors, could assist robo-advisors in providing the human touch required to alleviate clients' anxieties during difficult times. Betterment and Personal Capital, for example, already provide financial advisor access as part of their premium services.
Rise of Robo Advisors is Expected to Drive the Growth
One of the most significant changes in FinTech has been the rise of the robo-advisors. Their growth is primarily due to the fact that they have been able to reach a large segment of the public that does not have access to traditional consulting due to financial constraints, thereby bridging this gap. The financial services industry has been transforming and assisting advisory services in recent years. This revolution occurred at a time when the market was in the highest demand in history, thanks to the recent technological boom. To ensure that every individual has access to financial advice, new solutions have been added to the industry, which we call robot advising. Robo-advisors have gained the attention of investors and institutions seeking to understand the changing landscape. Nonetheless, despite their rapid growth, robot advisors hold a very small share of the market in comparison to traditional financial advice providers. Robot advisors use computer-based technology to redesign their portfolio management processes, creating a variety of algorithms to optimize clients' current asset portfolios and tax management. In practice, these "robots" can make trading recommendations in the stock market. Traditional investment advisory services have primarily served institutional clients. Individual investors could not seek assistance in this manner due to the high management costs. Furthermore, millennials are accustomed to reading electronic forms of communication. As a result, robot advisors are accessible to a large portion of the investing public.
To know more about global robo advisory market drivers, get in touch with our analysts here.
High Initial Cost of Robo Advisory and Lack of Expertise in the Market Expected to Hamper the Growth of the Robo Advisory Market
The issues concerning the size of investments and the depth of expertise required to develop and manage robo-advisory competencies in an environment with numerous legacy IT systems, and the high initial cost required for it can hinder the growth of the market.
The Use of Digital Technology and Automation in Wealth Management are Creating the Growth Opportunities for the Robo Advisory Market Globally
The digital revolution is reshaping traditional business environments in industries such as banking, asset management, and insurance. Because technology is constantly evolving, the term FinTech, an abbreviation for financial technology, has emerged. The wealth management (WM) industry is undergoing significant transformation. A new generation of investors, shaped by new technologies and having lived through the previous financial crisis, has brought new standards to the industry in terms of how advice and investment products are delivered. Additionally, as BFSIs embrace large-scale technology upgrades and digitization in an effort to return to normalcy, IoT, along with 5G and the cloud, are changing the way banks operate. The high cost of manual services, combined with the growing need to eliminate legacy operations, have compelled organizations to adopt new automation tools. These tools not only help to reduce costs, but they also help to increase capacity, improve employee engagement, and provide a better customer experience by providing superior products. This common trend is expected to continue be the competition for the traditional advisors. The rise in digitization has resulted in an increase in the number of robo-advisors, who use automated, algorithm-based systems to advice on portfolio management based on the financial condition, risk appetite, and future goals of individuals. For instance, in November 2021, JPMorgan, an American multinational investment bank and financial services holding company, filed an ADV for the launch of a call-center RIA led by a former Vanguard Group call center head, with explicit disclosures about who will manage the assets. Additionally, JP Morgan, in June 2021, acquired robo-advisor Nutmeg, which will spearhead the expansion of retail banking in the United Kingdom. A nearly £700 million deal with Nutmeg, a British digital wealth manager, as part of the US bank's expansion into the UK retail banking and investment market, was made. The speedy growth of artificial intelligence (AI) application areas is having a significant impact on the environment in which businesses operate. AI has the potential to completely transform the wealth management industry. The use of robots in wealth management and investment advice is a growing industry trend and creating the growth opportunities.
Robo Advisory Market
By Game Type
Source: Research Dive Analysis
The pure robo advisory sub-segment of the global robo advisory market is anticipated to have the fastest growing market share and surpass $ 27,931.5 million by 2028, with an increase from $ 2,096.8 million in 2020, with the CAGR of 39.5%. More than a decade after their inception, robo-advisors have reached a tipping point. Despite the initial success and hype, widespread adoption has remained elusive. As the number of market participants grows, pure play robo solutions begin to commoditize. Furthermore, while robo-advice is an excellent solution for simple portfolio strategies, difficulties arise as customer needs become more complex. For a young person with a low net worth, robo-advice may be the best option. The ongoing development of fintech digital services, as well as the high cost associated with traditional robo advisors, are creating growth opportunities for robo advisory providers, and ongoing research on pure robo advisory is assisting in market growth.
The hybrid robo advisory sub-segment of the global robo advisory market is anticipated to have dominant market share and surpass $ 31,413.0 million by 2028, with an increase from $ 2,503.2 million in 2020.Given the foregoing, various hybrid-model solutions are likely to be the best alternative when designing robo-advisory-based investment services. Based on the sources review, it is estimated that the long-term industry winners in the wealth management industry will be those service providers who can combine the efficiencies of AI with the personal requirements for trust and human understanding to add true value for customers through customer segmentation. For the majority of private banking customers with larger investable amounts, personal contact is still important (Cocca, 2016). As a result, regardless of the increased use of technology, a hybrid model in which the simplest services are provided using automated services, but the more complex advice is delivered as a personal service appears to have the greatest potential in the near future.
Robo Advisory Market
By End Use
Source: Research Dive Analysis
The HNI sub-segment is anticipated to have a dominant market share and generate a revenue of $21,678.5 million by 2028, growing from $1,671.5 million in 2020. Robo-advisors have emerged as important players in the investment management industry. These platforms have made investing more accessible, affordable, and automated by using mathematical algorithms to set and manage investment portfolios. Another advantage of robo-advisors for high-net-worth individuals (HNI) is that they can prevent them from making costly mistakes, such as selling afterward a market decline and then buying back in at the market peak. There are lists of robo advisors available in the market for HNI such as personal capital, betterment, vanguard personal advisor, and many more. The growing population of the HNI across the globe, increasing need of robo advisor to take the decisions such as business funding, or advice on the succession planning, and others have boosted the demand for market across the globe.
The affluent sub-segment is anticipated to have the fastest growth and generate a revenue of $10758.7 million by 2028, growing from $759.7 million in 2020, with the healthy CAGR of 41.6%. Over the past few years, a new wave of digital wealth management FinTech firms offering automated investment advisory services has started to gather the attention of the industry. This automated investment advisory solution has seen substantial market share growth over the past few years and is projected to gain even more traction going forward. Due to higher capital requirements, the affluent sub-segment is unable to access traditional advisory services provided by private banking. Clients in the mass affluent segment, who have more investable capital and better investment knowledge, would also benefit from professional advisory services. As a result, they are more likely to adopt robo-advisory solutions.
Robo Advisory Market
Source: Research Dive Analysis
The Market for Robo Advisory in North America was the Largest Share Holder in 2020
The North America robo advisory market accounted $1,616.9 million in 2020 and is projected to register a revenue of $19,488.7 million by 2028. In North America, the robo-advisor market is driven by factors such as increasing demand for internet finance/ robo finance and growing awareness about robo-services among consumers. In addition, technological advancements in digital advisory solutions are driving the growth of this market over the forecast period. The North America robo-advisor market is expected to grow in coming year also, driven by strong growth in the retail sector and increasing focus on cost management among the middle-income populations.
The Market for Robo Advisory in Asia-Pacific to be the Most Lucrative
The Asia-Pacific Robo advisory market accounted $1,374.9 million in 2020 and is projected to register a revenue of $19,518.4 million by 2028. The Asia-Pacific robo advisory market forecast is expected to grow at a significant CAGR 41.7%. Exploring opportunities in emerging markets is an unexpected way for market growth. For future growth prospects, a robo-advisor only needs to look to the Asia Pacific region, which has the world's largest and fastest growing middle class in terms of net worth, as well as more high net-worth millennial entrepreneurs than even the United States. These millennials are not only poised to receive their inheritances without incurring the student loan debt that plagues the only comparable market, the United States, but they are also more likely to trust robo-advisors than their counterparts in North America and Europe.
Competitive Scenario in the Global Robo Advisory Market
Product advancements, innovations, and business expansion are common strategies followed by major market players.
Source: Research Dive Analysis
Some of the leading robo advisory market players are Charles Schwab Corporation, The Vanguard Group, Inc., Betterment, FMR LLC., WEALTHFRONT CORPORATION., Ellevest, SigFig Wealth Management LLC. (Nvest, Inc.), Banco Santander S.A., Acorns., and T. Rowe Price.
Porter’s Five Forces Analysis for the Global Robo Advisory Market:
- Bargaining Power of Suppliers: Global robo advisory suppliers are numerous and increasingly globalized. As a result, suppliers of robo advisory lose bargaining power. As a result, the supplier's bargaining power is limited.
Thus, the bargaining power suppliers is low.
- Bargaining Power of Buyers: Buyers have strong bargaining power, owing to rising demand for robo advisory with advanced technologies such as fully automated (without human interference). As a result, multiple suppliers are providing multi functionality but low-cost devices. As a result, buyers have a wide range of options at various price points to choose from.
The bargaining power of the buyer is high.
- Threat of New Entrants: The companies entering robo advisory market have to deal with high investment cost and adhere to the environmental regulations as well.
Thus, the threat of the new entrants is low.
- Threat of Substitutes: There are various substitutes available in the market such as human advisor market. There is high demand for the human advisor over the digital or robo advisory due to the lack of awareness regarding the service available in the market at low prices, and they are affordable by the consumers.
Thus, the threat of substitutes is high.
- Competitive Rivalry in the Market: The ventures operating in the robo advisory industry are opting for multiple business development strategies to stronghold their market position in the industry. Also, the key players like Charles Schwab Corporation, The Vanguard Group, Inc., and Betterment. are investing heavily to provide good financial services to the customers.
Therefore, competitive rivalry in the market is high.
Historical Market Estimations
Base Year for Market Estimation
Forecast Timeline for Market Projection
North America, Europe, Asia-Pacific, LAMEA
Segmentation by business model
Segmentation by End-Use
Key Companies Profiled
Q1. What will be the market value of Robo Advisory Market by the end of forecast?
A. The size of the global robo advisory market was over $ 4,600.0 million in 2020 and is projected to reach $59,344.5 million by 2028.
Q2. Which are the major companies in the robo advisory market?
A. Charles Schwab Corporation, The Vanguard Group, Inc., and Betterment are some of the major companies operating in the global robo advisory market.
Q3. Which region, among others, possesses greater investment opportunities in the near future?
A. The Asia-Pacific region possesses great investment opportunities for investors to witness the most promising growth in the future.
Q4. What will be the growth rate of the Asia-Pacific robo advisory market?
A. The growth rate of the Asia-Pacific robo advisory market is 41.7%.
Q5. What are the strategies opted by the leading players in this market?
A. Product innovations, technological advancements, and business expansions are the key strategies opted by the operating companies in this market.
Q6. Which companies are investing more on R&D practices?
A. Charles Schwab Corporation, The Vanguard Group, Inc., and Betterment. These companies are investing more on R&D practices.
Q7. How Does a Robo-advisor Work?
A. A robo-advisor works by first gathering information about a client via an online survey and then investing for the client based on that information. Robo-advisers frequently employ passive index investing strategies.
Q8. Who is the target market of robo-advisors?
A. The target customer for robo-advisors would be anyone who has a negative attitude toward traditional financial institutions.
Q9. Do robo-advisors beat the market?
A. While robo-advisors are becoming more capable and gaining media attention, they are still far from replacing human financial advisors.
1.2.Real time insights and validation
1.4.Assumptions and forecast parameters
2.2.By type trends
2.3.By end-user trends
3.1.Market segmentation & definitions
3.2.1.Top investment pockets
3.2.2.Top winning strategies
3.3.Porter’s five forces analysis
3.3.1.Bargaining power of consumers
3.3.2.Bargaining power of suppliers
3.3.3.Threat of new entrants
3.3.4.Threat of substitutes
3.3.5.Competitive rivalry in the market
3.5.End Use landscape
4.Robo Advisory Market, by Type
4.1.Pure Robo Advisor
4.1.1.Market size and forecast, by region, 2020-2028
4.1.2.Comparative market share analysis, 2020 & 2028
4.2.Hybrid Robo Advisor
4.2.1.Market size and forecast, by region, 2020-2028
4.2.2.Comparative market share analysis, 2020 & 2028
5.Robo Advisory Market, by End Use
5.1.1.Others Market size and forecast, by region, 2020-2028
5.1.2.Comparative market share analysis, 2020 & 2028
5.2.1.Market size and forecast, by region, 2020-2028
5.2.2.Comparative market share analysis, 2020 & 2028
5.3.1.Market size and forecast, by region, 2020-2028
5.3.2.Comparative market share analysis, 2020 & 2028
5.4.1.Market size and forecast, by region, 2020-2028
5.4.2.Comparative market share analysis, 2020 & 2028
6.Robo Advisory Market, by Region
6.1.1.Market size and forecast, by Type, 2020-2028
6.1.3.Market size and forecast, by End Use, 2020-2028
6.1.4.Market size and forecast, by Country, 2020-2028
6.1.5.Comparative market share analysis, 2020 & 2028
126.96.36.199.Market size and forecast, by Type, 2020-2028
188.8.131.52.Market size and forecast, by End Use, 2020-2028
184.108.40.206.Market size and forecast, by Type, 2020-2028
220.127.116.11.Market size and forecast, by End Use, 2020-2028
18.104.22.168.Market size and forecast, by Type, 2020-2028
22.214.171.124.Market size and forecast, by End Use, 2020-2028
6.2.1.Market size and forecast, by Type, 2020-2028
6.2.2.Market size and forecast, by End Use, 2020-2028
6.2.3.Market size and forecast, by Country, 2020-2028
6.2.4.Comparative market share analysis, 2020 & 2028
126.96.36.199.Market size and forecast, by Type, 2020-2028
188.8.131.52.Market size and forecast, by End Use, 2020-2028
184.108.40.206.Market size and forecast, by Type, 2020-2028
220.127.116.11.Market size and forecast, by End Use, 2020-2028
18.104.22.168.Market size and forecast, by Type, 2020-2028
22.214.171.124.Market size and forecast, by End Use, 2020-2028
126.96.36.199.Market size and forecast, by Type, 2020-2028
188.8.131.52.Market size and forecast, by End Use, 2020-2028
184.108.40.206.Market size and forecast, by Type, 2020-2028
220.127.116.11.Market size and forecast, by End Use, 2020-2028
6.2.10.Rest of Europe
18.104.22.168.Market size and forecast, by Type, 2020-2028
22.214.171.124.Market size and forecast, by End Use, 2020-2028
6.3.1.Market size and forecast, by Type, 2020-2028
6.3.2.Market size and forecast, by End Use, 2020-2028
6.3.3.Market size and forecast, by country, 2020-2028
6.3.4.Comparative market share analysis, 2020 & 2028
126.96.36.199.Market size and forecast, by Type, 2020-2028
188.8.131.52.Market size and forecast, by End Use, 2020-2028
184.108.40.206.Market size and forecast, by Type, 2020-2028
220.127.116.11.Market size and forecast, by End Use, 2020-2028
18.104.22.168.Market size and forecast, by Type, 2020-2028
22.214.171.124.Market size and forecast, by End Use, 2020-2028
126.96.36.199.Market size and forecast, by Type, 2020-2028
188.8.131.52.Market size and forecast, by End Use, 2020-2028
184.108.40.206.Market size and forecast, by Type, 2020-2028
220.127.116.11.Market size and forecast, by End Use, 2020-2028
6.3.10.Rest of Asia Pacific
18.104.22.168.Market size and forecast, by Type, 2020-2028
22.214.171.124.Market size and forecast, by End Use, 2020-2028
6.4.1.Market size and forecast, by Type, 2020-2028
6.4.2.Market size and forecast, by End Use, 2020-2028
126.96.36.199.Market size and forecast, by Type, 2020-2028
188.8.131.52.Market size and forecast, by End Use, 2020-2028
184.108.40.206.Market size and forecast, by Type, 2020-2028
220.127.116.11.Market size and forecast, by End Use, 2020-2028
18.104.22.168.Market size and forecast, by Type, 2020-2028
22.214.171.124.Market size and forecast, by End Use, 2020-2028
7.1.Charles Schwab Corporation
7.1.4.Recent strategic moves & developments
7.2.The Vanguard Group,Inc
7.2.4.Recent strategic moves & developments
7.3.4.Recent strategic moves & developments
7.4.4.Recent strategic moves & developments
7.5.4.Recent strategic moves & developments
7.6.4.Recent strategic moves & developments
7.7.SigFig Wealth Management LLC. (Nvest, Inc.)
7.7.4.Recent strategic moves & developments
7.8.Banco Santander S.A.
7.8.4.Recent strategic moves & developments
7.9.4.Recent strategic moves & developments
7.10.T. Rowe Price
7.10.4.Recent strategic moves & developments
Robo advisor is a software used to help investors to manage their investments, funds, and portfolios online with less human intervention. It gathers all the relevant information, such as risk tolerance, investment timeline, and returns with their savings from clients via an online questionnaire. Robo advisor utilizes algorithm calculations in order to analyze the data and provide broad asset allocation approach that meets the goals of the investor. The robo advisory market has recorded continuous investments for its advancements & developments and has become a huge contributor to the economic growth.
COVID-19 Impact on Robo Advisory Market
The outbreak of COVID-19 across the globe has favorably impacted the global robo advisory market growth. The positive impact on the market is majorly owing to the acceleration in digital transformation across the globe due to lockdown restrictions. The spread of the coronavirus has forced accountants and advisers to shift to online meetings from direct face-to-face ones, collaborate digitally, and assist small businesses in preparing for tougher times. In addition, countries with lower community mobility and more stringent coronavirus policies experienced a larger increase in financial app downloads during the pandemic period. The pandemic has already amplified the shift to digital payments and has also intensified e-commerce, which is benefitting big tech firms and their activities in finance. All these factors have progressively impacted the global robo advisory market growth.
Robo Advisory Market Trends and Developments
The companies operating in the global industry are adopting several growth strategies and business tactics such as partnerships, collaboration, business expansion, and product launches to obtain a leading position in the global industry, which is predicted to drive the global robo advisory market growth in the upcoming years.
For instance, in August 2019, Wealthfront, an automated investment service firm, completed the acquisition of Grove, a robo advisor providing financial plans to clients. According to the company, the deal will accelerate the Self-Driving Money’s development, which is the Wealthfront’s technology-laden vision for the future of wealth management. With Self-Driving Money, client paychecks will be deposited directly onto the platform, investment accounts will be funded properly, bills automatically paid, and emergency funds topped off.
In June 2020, Vanguard Group, the leading provider of investment management and advisory services, expanded the reach of the second-largest money manager across the world to a younger clientele by launching a robo advisory service that cover key elements of long-term financial planning at low cost. The automated service namely, ‘Digital Advisor’ is aimed at younger investors and cuts out human financial advisers entirely.
Forecast Analysis of Global Market
The global robo advisory market is projected to witness an exponential growth over the forecast period, owing to the increasing usage digital technology and automation in wealth management. Conversely, the lack of expertise and the high initial cost of robo advisory are expected to hamper the market growth in the projected timeframe.
The significant rise of the robo advisories in the FinTech is the significant factor estimated to bolster the growth of the global market in the coming future. According to a latest report published by Research Dive, the global robo advisory market is expected to garner $59,344.5 million during the forecast period (2021-2028). Regionally, the Asia-Pacific market is estimated to observe lucrative growth by 2028, owing to the largest and fastest growing middle class in terms of net worth in the region, as well as the presence of more high net-worth millennial entrepreneurs compared to the United States.
The key players functioning in the global market include
- Charles Schwab Corporation
- The Vanguard Group, Inc.
- FMR LLC
- WEALTHFRONT CORPORATION
- SigFig Wealth Management LLC (Nvest, Inc.)
- Banco Santander S.A.
- T. Rowe Price.