Robo Advisory Market Size (2024-2030)

The Global Robo Advisory Market was valued at USD 10.47 billion in 2023, and is projected to reach USD 75.07 billion by 2030, growing at a CAGR of 32.5% from 2024 to 2030.

The term "robo-advisor" is not novel; it has been present in the market for two decades. Nevertheless, over the past four to five years, technological advancements have significantly accelerated its development. The present upsurge in robo-advisory is reshaping the landscape of the advisory industry. The appeal of low fees is driving the adoption of robo-advisors, consequently spurring the uptake of robo-advisory software tools. The conventional advisor model is gradually being supplanted by the contemporary robo-advisory model, and this shift is anticipated to have a substantial impact on the future of portfolio management systems. Wealth managers utilize robo-advisory software to automate the management of portfolios and offer investment guidance without human intervention. Robo-advisory software platforms automatically generate portfolios based on client-specified risk parameters, income, and other relevant factors. Additionally, these applications can automate tasks such as reinvesting dividends and optimizing tax-related activities. Employing algorithms and Artificial Intelligence (AI), the software tool furnishes advisors with distinctive insights into their clients, reducing churn and enhancing engagement.

Key Market Insights:

The extensive utilization of robo-advisory across diverse industrial sectors, including retail banking and asset management, for executing algorithmic calculations to analyze data and disseminate comprehensive information is propelling the market. Additionally, the increasing integration of artificial intelligence (AI) and machine learning (ML) into investment platforms stands out as a significant trend in the robo-advisor landscape. An illustrative example is the announcement by Kenanga IB, a Malaysian financial services firm, in February 2022, regarding the launch of Kenanga Digital Investing (KDI).

Furthermore, governments are actively encouraging smaller vendors to enter the market with innovative products across various economies. For instance, in May 2020, United Overseas Bank Asset Management Ltd. (UOBAM) introduced robo-advisory services, UOBAM Invest, offering personalized online investment portfolios to assist companies in achieving their investment objectives. UOBAM Invest is accessible to corporate investors with a minimum investment of USD 0.115 million. Such initiatives are fostering the adoption of robo-advisors, thereby making a positive contribution to the growth of the industry.

Global Robo Advisory Market Drivers:

The Growth of Robo-Advisory Market Driven by Increasing Demand for Personalized Investment Solutions

Robo-advisors have emerged as an alternative to traditional financial advisory services. The success of robo-advisors hinges on their capability to provide personalized financial advice, a growing requirement among investors. Organizations that can offer personalized solutions at scale gain a competitive advantage in the evolving landscape of investment management. The demand for personalized investment strategies is on the rise among various end users, including institutional clients and retail investors, propelling the growth of the robo-advisory market. Personalized robo-advisory solutions provide tailored content and recommendations based on customer data and preferences. This includes personalized emails, newsletters, and notifications with relevant information, tips, and updates on portfolio performance, market trends, and financial goals. Utilizing data analytics and machine learning, robo-advisors suggest suitable products, services, and strategies based on the client's risk profile, investment horizon, and financial needs. The increased demand for personalized investment solutions is a key driver of the robo-advisory market's growth.

Rising Preference for Robo-advisory Software Tools Over Traditional Advisory Due to Lower Costs and Enhanced Convenience

Robo-based advisory services are experiencing increased adoption among wealth management firms, driven by lower costs compared to traditional models. Traditional financial advisors typically charge 1% or more per year of assets under management (AUM), while many robo-advisors charge approximately 0.25% per year. This cost differential accelerates the demand for robo-based advisory services, aiming to reduce expenses and enhance transparency. Additionally, the 24/7 availability and convenience offered by robo-advisory services, coupled with increased efficiency and profitability, further contribute to the growing demand among wealth managers.

Global Robo Advisory Market Constraints and Challenges:

The market may be impacted by risk factors related to robo-advisory software, including as disruptions in IT and cybersecurity risks.

Robo-advisory software platforms are reliant on technology systems, exposing investors to potential risks such as cyberattacks, IT glitches, or outages. Insufficient security measures could provide multiple target points for hackers to compromise data and finances. Inadequate security poses a significant constraint on the robo-advisory software market, as it increases the risk of cyber and phishing attacks. Additionally, IT glitches or outages may occur, leading to downturns in system performance.

Market expansion may be harmed by regulatory challenges.

Regulatory challenges represent a significant hurdle for the robo-advisory software market. As robo-advisory services are provided across various jurisdictions, different laws and regulations may apply. The absence of a unified supervisory body across multiple jurisdictions makes it challenging for financial institutions to anticipate the applicability of regulations to their technologies and ensure compliance. Providing personalized investment robo-advice involves collecting substantial financial information and personal data from clients, raising concerns about data storage, retention, and retrieval, especially in the context of cross-border provision of advice where multiple privacy laws may apply.

Global Robo Advisory Market Opportunities:

The Growing Demand for Robo-advisory Services in Emerging Economies

While robo-advisory services have gained significant popularity in developed nations like the US, Germany, the UK, Canada, Japan, etc., emerging economies such as China, India, and Brazil are rapidly embracing digitalization. The acceleration of advanced technology adoption in these emerging countries aims to enhance efficiency and boost profitability, creating several promising opportunities during the forecasted period.

Furthermore, factors such as the increase in internet penetration, a rise in the number of internet users, and the expansion of global financial giants into these countries are key contributors propelling market growth. Consequently, the swift adoption of robo-advisory services is poised to unveil lucrative prospects for robo-advisory software vendors.

ROBO ADVISORY MARKET REPORT COVERAGE:

Global Robo Advisory Market Segmentation:

Global Robo Advisory Market Segmentation: By Type

• Pure Robo Advisor
• Hybrid Robo Advisor

In the year 2023, the market witnessed the dominance of hybrid robo-advisors, capturing the largest market share at 64% and generating a market revenue of 2.64 billion. The segmentation based on type classifies the robo-advisory market into Pure Robo Advisor and Hybrid Robo Advisor. Hybrid robo advisors, excelling in 2022 with a market share of 64% and sales totaling 2.64 billion, are anticipated to experience growth due to the demand for a blend of human financial advisor elements and the efficiency of robotic algorithms. Furthermore, the inclusion of live, one-on-one conversations offered by hybrid robo-advisors for financial reviews adds an additional layer of security. For instance, Voya Financial, a U.S.-based investment company, strategically introduced a hybrid robo-advisory platform to enhance advisor productivity and communication with broker-dealers.

Global Robo Advisory Market Segmentation: By Provider

• Fintech Robo Advisors
• Banks
• Traditional Wealth Manager
• Others

In the year 2023, fintech robo advisors claimed the largest market share, accounting for 30%, and generated a market revenue of 1.23 billion. The segmentation based on providers categorizes the robo advisory market into Fintech Robo Advisors, Banks, Traditional Wealth Managers, and Others. Fintech robo advisors, dominating the industry with 1.23 billion in sales in 2022, leverage automation and personalized consulting services as key components globally. The swift deployment of robo advisors by fintech companies, incorporating cutting-edge technologies such as advanced analytics and quantitative finance, ensures retail investors receive precise and reliable advice, preventing unwise investment decisions.

Global Robo Advisory Market Segmentation: By Service Type

• Direct Plan-based/Goal-based
• Comprehensive Wealth Advisory

The direct plan-based/goal-based segment led the market in 2023, commanding a market share of 56% and generating a market revenue of 2.31 billion. Segmentation based on service types divides the Robo Advisory market into Direct Plan-based/Goal-based and Comprehensive Wealth Advisory. The dominance of the direct plan-based/goal-based segment is attributed to investors valuing the thorough goal planning, portfolio management, security features, and attentive customer care provided by robo-advisors. The adoption of goal-based robo-advisors, offering risk profiling and goal-based suggestions, empowers customers to run scenarios on goal planning, enhancing their chances of success. The projected growth of this segment is expected to be hastened by the introduction of new goal-setting platforms with flexible options, cost-free digital financial planning tools, and potent progress monitors integrated across the platform.

Global Robo Advisory Market Segmentation: By End User

• Retail Investor
• High Net Worth Individuals

In 2023, the high-net-worth individuals (HNIs) segment led the robo advisory market share, and this dominance is projected to continue during the forecast period. The surge in adoption of robo-advisors among HNIs for managing monetary assets and minimizing losses drives the growth of this segment. However, the retail investor segment is expected to experience the highest growth rate during the forecast period due to the growing adoption of these services for managing and controlling portfolios.

Global Robo Advisory Market Segmentation: Regional Analysis:

• North America
• Asia-Pacific
• Europe
• South America
• Middle East and Africa

North America emerged as the largest market for the global Robo Advisory market in 2023, with a market share of around 39.4% and revenue of 4.13 billion. The U.S. robo-advising market is anticipated to grow with the presence of notable firms such as Betterment and The Vanguard Group, Inc.

The Asia-Pacific Robo Advisory Market is expected to exhibit the fastest Compound Annual Growth Rate (CAGR) between 2024 and 2030. The anticipated significant expansion in the Asia Pacific region is linked to increasing consumer awareness of the advantages of utilizing automated financial assistance for investments and savings. Several businesses in the Asia Pacific are actively promoting the adoption of robo-advising, contributing to the region's growth. For example, TradeSmart, a prominent online discount brokerage company in India, partnered with Modern Algos in July 2022 to offer AI-powered advisory services, incorporating deep insights based on algorithms to provide personalized advice.

COVID-19 Impact Analysis on the Global Robo Advisory Market:

In response to the COVID-19 pandemic, the World Health Organization (WHO) recommended preventive measures to reduce close contact in human interactions and public gatherings. Consequently, financial advisors had to transition from physical meetings to virtual ones with clients, presenting challenges in acquiring new clients due to higher advisory fees and existing biases. This shift has expedited the embrace of digital technology, including Robo-advisory platforms that operate without direct human intervention. Moreover, the financial volatility induced by the COVID-19 crisis has spurred investors to adopt Robo-advisory services for both wealth and investment management. This increased adoption has, in turn, amplified the demand for Robo-advisory software among wealth managers. The pandemic's impact on the financial landscape has underscored the value of automated processes in navigating uncertainties and managing investment portfolios.

Latest Trends/ Developments:

In November 2022, J.P. Morgan Wealth Management revealed the initiation of its remote advisory service, J.P. Morgan Personal Advisors. This service enables clients to engage in video consultations with an advisor and construct a financial plan from any location.

By March 2022, flatexDEGIRO AG, recognized as Europe's largest and most rapidly expanding online broker for retail investors, declared the formalization of a Memorandum of Understanding (MoU). This agreement aimed to extend its longstanding business-to-business (B2B) partnership with the digital wealth manager Whitebox, a prominent independent robo-advisor for retail investors. The collaborative efforts of flatexDEGIRO and Whitebox deliver a comprehensive digital investment solution to the customers of flatexDEGIRO.

In January 2023, M&G Wealth introduced the launch of a hybrid robo-advisor. This innovative platform utilizes an algorithm to assess each customer's risk tolerance, financial acumen, and financial position. Accessible as both an app on Android and iOS and a web application, the platform offers investors a selection between 'classic' and 'targeted' portfolios. This strategic move aligns with the industry trend of integrating algorithmic technologies to enhance the investment experience for clients.

Key Players:

1. Betterment
2. Fincite GmbH
3. Wealthfront Corporation.
4. The Vanguard Group, Inc.
5. Charles Schwab & Co., Inc.
6. Ellevest
7. Ginmon Vermögensverwaltung GmbH
8. Wealthify Limited
9. Social Finance, Inc.
10. SigFig Wealth Management