Sector Summary on Robo-Advisors: The Future of Wealth Management

For many years, we have been working with investment advisors to make the best use of our money. The accuracy and consistency of their advice have always been in question, but we never cared about it much until the time we started having choices. And now that software is taking over the world, we do have choices that are based on analytics and automation.

Wealth Management firms are going through a dynamic shift—from a traditional approach to a trendy one—attracting millennials by introducing robo-advisory platforms. Robo-advisor services can quickly provide customers with well-diversified investment portfolios suitable for their risk tolerance and long-term investment objectives. Due to such convenient and low-priced service offered by this technology, a growing number of startups and traditional investment firms are also turning towards it.

LTP has come up with a sector summary titled Robo-Advisors: Future of Wealth Management. The summary analyzes the players in the robo-advisors landscape in the US and the various trends in this sector.

Assets managed by robo-advisors are estimated to increase by 68% annually and to about $2.2 trillion in five years.

The robo-advisor space includes online platforms such as Wealthfront, Betterment, AssetBuilder, Financial Guard, FutureAdvisor, Jemstep, Personal Capital and SigFig. These firms develop automated investment portfolios and recommendations for their individual clients.

The drivers for robo-advisors are:

  1. Lower account minimums: Wealth management firms require investors to have a minimum of $100,000 or more in investable assets. Robo-advisers have investment minimums in the low four-digit numbers.
  2. Lower fees: Robo-advisors are inexpensive. Traditional wealth management services charge 1% of assets under management or more; the typical fee charged by a robo-adviser is lower, depending on account size.
  3. Upgrading technology: The rapidly evolving technology not only crunches numbers but also assimilates, categorizes, analyzes and differentiates—making higher-level decisions; the emergence of mobile technology is the key for growth.
  4. Demographic advantage: Investors of all ages are using robo-advisors, but not surprisingly, they are especially popular among millennials and Generation Xers who grew up with technology.

Table of Contents:

  • Introduction to Robo-Advisors
  • Estimated US Robo-Advisor Assets Under Management (USD in Trillions)
  • Robo-Advisors: Forecast
  • Robo-Advisor Player Landscape in the US
  • Market Trends
  • Technology Trends
  • Consumer Trends
  • Regulations