The Global Robo Advisory Market Anticipated to Generate a Revenue of $59,344.5 Million, Growing at a CAGR of 39.9% from 2021 to 2028Download Sample Reports Overview
The global robo advisory market is estimated to be valued at $59,344.5 million by 2028, surging from 4,600.0 million in 2020 at a noteworthy CAGR of 39.9%
COVID-19 Impact on Robo Advisory Market
The pandemic of COVID-19 has accelerated the digital transformation. Particularly as economies, financial services providers, businesses, and individuals navigate the pandemic and the eventual post-COVID-19 world, the need for digital connectivity to switch physical interactions among providers and consumers, as well as in the processes that produce financial services, will become even more critical. The impact of the pandemic on the robo advisory market is positive; the spread of the virus forces advisers and accountants to shift from direct face-to-face meetings to online ones, and they must collaborate digitally, assisting small businesses and households in preparing for tougher times. For instance, the pandemic has already augmented the shift to digital payments, it has also intensified e-commerce, which may benefit big tech firms and their activities in finance. Countries with more stringent COVID-19 policies and lower community mobility experienced a larger increase in financial app downloads in the wake of the outbreak. Finally, it may be speeding up work on central bank digital currencies. Finance is undergoing a profound transformation. Digital technologies are reshaping advisory, lending, insurance, and wealth management – a process that the COVID-19 pandemic has accelerated. While this is making robo advisory financial services in many economies more competitive, efficient, and inclusive, it may also increase concentration in markets.
Global Robo Advisory Market Analysis
Robo-advisors are digital platforms that offer automated, algorithm determined financial planning services with little to no human oversight. The concept of robo-advisors emerged during the 2008 financial crisis, when small investors had cash surpluses as they withdrew money from equities and interest rates were near zero. Betterment, the leading robo-advisory firm, took advantage of this opportunity by boosting investors to invest in algorithm-driven portfolios for consistent returns. Since then, robo-advisory has become the wealth management industry's buzzword, and many traditional players have introduced robo-advisors as part of their solution portfolio. Despite increased adoption, robo-advisory has yet to live up to the hype surrounding its inception, and robo-advised assets are a drop in the ocean. Furthermore, robo advisory firms are expected to gain traction among various end-user industries, owing to an increase in individual wealth, healthy economic growth around the world, and the need for regulatory compliance.
However, insufficient technical expertise and lack of knowledge can hamper the growth of the market.
Digital financial advisory services, particularly robo-advisors, are becoming more popular in retail and private banking across all countries. In the wealth management industry, the advisory model has evolved and shifted from commission-based to performance-based models. The robo advisory market is expected to grow at the fastest rate during the forecast period due to increased competition, rapidly changing market dynamics, and evolving client requirements. Furthermore, it has emerged as an effective low-cost alternative for retail investors, with benefits such as low-cost fee structure, ease of use, low to zero account minimums, and diverse services, and is expected to gain full opportunities traction during the forecast period. Furthermore, a unique combination of consumer traits and favorable regulatory environments creates a fertile breeding ground for second-generation robo-advisors. The largest growth opportunity in the robo-advising industry's brief history may be in Asia-Pacific emerging markets such as Southeast Asia and the Middle East.
Global Robo Advisory Market Size, by Segmentation
The global robo advisory market is segmented into business model, end-use, and region.
Based on business model, the market has been divided into pure robo advisor and hybrid robo advisor. The hybrid robo advisor sub-segment is expected to have the largest market share, with revenues exceeding $31,413.0 million by 2028, up from $2,503.2 million in 2020. The hybrid robo-advisors segment had the highest market share by business model, accounting for nearly a quarter of the global robo advisory market. This is due to an increase in international trade and investment, as well as an increase in demand for customized fund portfolios. Users are increasingly interested in robo-advisor platforms, and larger, more traditional financial institutions are launching their own versions.
The end-use segment is further classified into retail, af?uent, HNI, and UHNI. The HNI sub-segment is the largest sub-segment of the robo advisory market and garner a market share of $21,678.5 million by 2028, up from $1,671.5 million in 2020. With the rise of the HNI population across the globe, the wealth management industry is undergoing significant change: a new generation of investors, whose potentials and preferences have been shaped by new technologies and their experiences during the last financial crisis, have set new standards for how advice and investment products are delivered. Robo-advisors are online investment management services that use mathematical algorithms to provide financial advice with minimal human intervention. Their algorithms are used to manage and allocate client assets in the most efficient manner possible. These companies manipulate customer survey data to create complex algorithms that generate customized financial plans and asset allocations. They also help investors find relevant research within an ever-growing universe of studies, interviews, and market commentaries. The demand for the robo advisory is increasing continuously due to the increasing regulatory burdens, new business models, and new competitive patterns.
The robo advisory market in the Asia-Pacific region is predicted to be the fastest growing. The market in Asia-Pacific generated a revenue of $1,374.9 million in 2020 and is projected to reach up to $19,518.4 million by 2028. The rising preferences and comfort with digital tools have a profound impact on the market and participants in the expanding gig economy are increasingly in need of new approaches for protection and retirement planning in Asia-Pacific regions. Moreover, the adoption of the technologies in the field of financial services among the consumer is on rise owing to the growing expectation of the client like virtual engagement, omnichannel support, and seamless apps experience at a pace set by industries of financial services. Moreover, the rapid technological progress and robotic process automation, machine learning, advanced analytics, natural language processing, and also more automation & efficiency are booming the demand for the robo advisory market.
Key Players in the Global Robo Advisory Market
Some of the leading global robo advisory market players are
- Charles Schwab Corporation
- The Vanguard Group, Inc.
- FMR LLC.
- WEALTHFRONT CORPORATION.
- SigFig Wealth Management LLC. (Nvest, Inc.)
- Banco Santander S.A.
- T. Rowe Price.
Along with the company profiles of the key players in the market, the report includes the Porter’s five forces model that gives deep insights into the competitive environment of the market.
Porter’s Five Forces Analysis for the Global Robo Advisory Market:
- Bargaining Power of Suppliers: Global robo advisory suppliers are plenty, and they are becoming increasingly globalized. As a result, robo advisory suppliers lose bargaining power. As a result, the supplier's negotiating power is constrained.
Thus, the bargaining power suppliers is low.
- Bargaining Power of Buyers: Buyers have strong bargaining power as the market for robo advisory with advanced technologies at lower prices grows. As a result, a wide variety of suppliers are offering digital financial services at low-cost. As a result, buyers have a wide range of options to choose from at various price points.
The bargaining power of the buyer is high.
- Threat of New Entrants: Companies entering the robo advisory market must deal with high investment costs while also adhering to government regulations.
Thus, the threat of the new entrants is low.
- Threat of Substitutes: There are substitutes available in the market such as traditional advisor. There is still huge demand for the traditional robo advisory services among the people across the globe.
Thus, the threat of substitutes is high.
- Competitive Rivalry in the Market: To maintain their market position in the robo advisory industry, ventures are employing a variety of business development strategies. Furthermore, companies in order to provide customers with high-quality of financial services, are looking ahead to enhance the algorithm and develop the advisors which help the users in all aspect just like traditional advisors.
Therefore, competitive rivalry in the market is high.